Question

Brooke Company grants James Decorating additional time to pay its past-due account. James makes a written promise to pay Brooke the amount on a certain date. James records this transaction by debiting
a. Notes Receivable and crediting Accounts Receivable.
b. Cash and crediting Accounts Receivable.
c. Accounts Receivable and crediting Notes Receivable.
d. Accounts Payable and crediting Notes Payable.

Answer 1

He will be paying out a debt so the answer is D.

Answer 2

Answer:

d. Accounts Payable and crediting Notes Payable.

Explanation:

When James incurred the cost, a payable would have been recorded in his books by debiting asset/expense and crediting accounts payable since cash was not paid.

On issuance of the written promise, James would reclassify the amount from accounts payable to notes payable by debiting Accounts Payable and crediting Notes Payable.