Question

Admire County Bank agrees to lend Givens Brick Company $300,000 on January 1. Givens Brick Company signs a $300,000, 8%, 9-month note. The entry made by Givens Brick Company on January 1 to record the proceeds and issuance of the note is Question 9 options: A) Cash 300,000 Interest Expense 18,000 Notes Payable 318,000 B) Cash 300,000 Interest Expense 18,000 Notes Payable 300,000 Interest Payable 18,000 C) Cash 300,000 Notes Payable 300,000 D) Interest Expense 18,000 Cash 282,000 Notes Payable 300,000

Answer 1

Answer:

The correct option is C.

Cash A/c Dr       $300,000

   To Notes Payable      $300,000

(Being notes payable issued)

Explanation:

As brick company has sign a $300,000 note which consist 7% interest rate and the duration of note is 9 month on January 1

The question has asked the journal entry on January 1 date.

So, the journal entry is

Cash A/c Dr       $300,000

   To Notes Payable      $300,000

(Being notes payable issued)

The interest part should be ignored because in the question they asked the journal entry of January 1 not in the end of the month. According to the date of asking the journal entry, the amount is to be calculated. Thus, interest should not be considered.

Hence, the correct option is C.

Cash A/c Dr       $300,000

   To Notes Payable      $300,000

(Being notes payable issued)