Question

The journal entry used to record the issuance of an interest-bearing note for the purpose of borrowing funds for the business is: a. debit Cash; credit Notes Payable b. debit Cash and Interest Expense; credit Notes Payable c. debit Notes Payable; credit Cash d. debit Accounts Payable; credit Notes Payable

Answer 1

Answer:

a. debit Cash; credit Notes Payable

Explanation:

The journal entry for issuance of an interest-bearing note is shown below:

Cash A/c Dr XXXXX

        To Notes payable XXXXX

(Being the issuance of the interest-bearing note is recorded)

For recording this transaction we debited the cash account and credited the notes payable account so that the correct posting could be done.