Question

Admire County Bank agrees to lend Givens Brick Company $600,000 on January 1st. Givens Brick Company signs a $600,000, 8%, 9-month note. What entry should be made by Givens Brick Company on January 1st to record the proceeds and issuance of the note?

Answer 1

Answer:

The journal entry for the issuance and the proceeds of the note is shown below:

Explanation:

Cash A/c.........................Dr   $600,000

    Notes Payable A/c......Cr  $600,000

The givens company received a amount of $600,000 from the bank, so cash is increasing and increase in cash is debited. Therefore, the cash account is debited. Whereas, the cash against a note payable, which increases the liability and any increase in liability is credited. Therefore, notes payable is credited.