On July 1, Shady Creek Resort borrowed $250,000 cash by signing a 10-year, 8% installment note requiring equal payments each June 30 of $37,258. What is the appropriate journal entry to record the issuance of the note? A. Debit Cash $250,000; debit Interest Expense $37,258; credit Notes Payable $287,258. B. Debit Notes Payable $250,000; credit Cash $250,000. C. Debit Cash $37,258; credit Notes Payable $37,258. D. Debit Cash $250,000; credit Notes Payable $250,000. E. Debit Cash $287,258; credit Interest Payable $37,258; credit Notes Payable $250,000.

Question

Business

Cookie Dough

24 November, 12:33

On July 1, Shady Creek Resort borrowed $250,000 cash by signing a 10-year, 8% installment note requiring equal payments each June 30 of $37,258. What is the appropriate journal entry to record the issuance of the note? A. Debit Cash $250,000; debit Interest Expense $37,258; credit Notes Payable $287,258. B. Debit Notes Payable $250,000; credit Cash $250,000. C. Debit Cash $37,258; credit Notes Payable $37,258. D. Debit Cash $250,000; credit Notes Payable $250,000. E. Debit Cash $287,258; credit Interest Payable $37,258; credit Notes Payable $250,000.

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Answers (1)

Know the Answer?

Terry Wallace · Answer 1

The correct option is A

Explanation:

The journal entry for the issuance of the note will be shown below:

Cash A/c ... Dr $250,000

Notes Payable A/c ... Cr $250,000

When issuing the note, the cash account is debited because increase in asset is debited. So, cash is asset that is why it is debited. And notes payable is issued against the cash so, it is credited.