Question

On September 1, Vicario, Inc., borrows $100,000 from First National Bank at 6 percent annual interest. This note is due in 90 days. Prepare the September 1 journal entry for Vicario by selecting the account names from the drop-down menus and entering the dollar amounts in the debit or credit columns.

Answer 1

Answer:

Sep 1st

Debit Cash                   100,000

Credit Note Payable   100,000

(to record 90-day note borrowing from First National Bank)

Explanation:

As at September 1, Vicario Inc receive the cash amount of $100,000 from First National Bank through Borrowing, the Cash account should be recorded up $100,000 ( that is, Dr, as Cash is an asset account) to reflect the transaction.

The offseting Credit entry will be recorded in Note Payable account ( which is a liability account) to reflect the liability of $100,000 owed to the Bank.

As at 1 September, the first day of assuming the debt, no interest expenses is incurred, so, no entry is needed to record interest expense.