Asked by Margot Rochester on Jun 14, 2024
Verified
The journal entry used to record the issuance of an interest-bearing note for the purpose of borrowing funds for the business is
A) debit Accounts Payable; credit Notes Payable
B) debit Cash; credit Notes Payable
C) debit Notes Payable; credit Cash
D) debit Cash and Interest Expense; credit Notes Payable
Interest-bearing Note
A type of promissory note or loan agreement that includes an obligation to pay a fixed or variable interest rate over the term of the loan.
Journal Entry
A record in accounting that represents a transaction in the books of accounts, detailing the financial operations of a business.
- Record financial transactions related to notes payable, including issuance, payment, and conversion from accounts payable.
Verified Answer
AB
Adriana BoskovskiJun 15, 2024
Final Answer :
B
Explanation :
When a business issues an interest-bearing note to borrow funds, the journal entry to record the transaction involves debiting Cash, which represents the receipt of funds, and crediting Notes Payable, which represents the obligation to repay the borrowed funds plus interest. Therefore, option B - debit Cash; credit Notes Payable - is the correct journal entry to record the issuance of an interest-bearing note for borrowing funds.
Learning Objectives
- Record financial transactions related to notes payable, including issuance, payment, and conversion from accounts payable.