Question

Moss County Bank agrees to lend the Allenson Brick Company $200,000 on January 1. Allenson Brick Company signs a $200,000, 6%, 9-month note.
The entry made by Allenson Brick Company on January 1 to record the proceeds and issuance of the note is

a. Interest Expense 9,000
Cash. 191,000
Notes Payable 200,000
b. Cash 200,000
Notes Payable 200,000
c. Cash 200,000
Interest Expense 9,000
Notes Payable 209,000
d. Cash 200,000
Interest Expense 9,000
Notes Payable 200,000
Interest Payable 9,000

Answer 1

Answer:

• The entry made by Allenson Brick Company on January 1 to record the proceeds and issuance of the note is

b. Cash 200,000

Notes Payable 200,000

Explanation:

At the moment the company receive the money it must reflect the movement with an entry to the balance sheets, which is , a debit entry to the Cash accounts by the amount received and a credit entry to Note Payable accounts reflecting the liabilities that the company will have from now.

The interest expenses are recorded at the moment of the interest are paid which is in 9 months from now.