Question

Admire County Bank agrees to lend Sheffield Brick Company $614000 on January 1. Sheffield Brick Company signs a $614000, 8%, 9-month note. The entry made by Sheffield Brick Company on January 1 to record the proceeds and issuance of the note is:______________.

Answer 1

Answer:

January 1

Cash                                    614000 Dr

   Notes Payable                      614000 Cr

Explanation:

The Sheffield Brick Company has borrowed from the Admire county bank which means the note payable is a liability in the books of the Sheffield Brick company. As liability is increased or recorded, it is credited. The amount of liability is $614000 on the day of the issuance of note. Thus, Sheffield will credit Note payable by $614000.

The Sheffield company has received cash by signing note. As cash is an asset and it is increasing, the Sheffield company will debit cash by 614000 against the notes payable.