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7 March, 05:49

On May 22, Jarrett Company borrows $7,500 from Fairmont Financing, signing a 90-day, 8%, $7,500 note. What is the journal entry needed to record the transaction by Jarrett Company? Multiple Choice Debit Cash $7,500; credit Notes Payable $7,500. Debit Notes Receivable $7,500; credit Cash $7,500. Debit Cash $7,650; credit Notes Payable $7,650. Debit Cash $7,500; credit Accounts Payable $7,500. Debit Accounts Payable $7,500; credit Notes Payable $7,500.

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  1. 7 March, 09:34
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    The correct answer is Debit Cash and Credit Noted Payable

    Explanation:

    The journal entry for borrowing the cash is as follows:

    Cash A/c ... Dr $7,500

    Notes Payable A/c ... Cr $7,500

    As Jarrett company borrowed the amount of $7,500, so cash is increasing and any increase in asset account will be debited. Therefore, the cash account is debited. Whereas he signed a notes payable against the cash so notes payable account is credited.
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