Asked by Meira Myers on May 23, 2024
Verified
The journal entry used to record the issuance of a discounted note for the purpose of borrowing funds for the business is
A) debit Cash and Interest Expense; credit Notes Payable
B) debit Cash and Interest Payable; credit Notes Payable
C) debit Accounts Payable; credit Notes Payable
D) debit Notes Payable; credit Cash
Discounted Note
A promissory note issued at a price lower than its face value that promises to pay the holder the full face value at maturity.
Journal Entry
A record in accounting journals that details a business transaction, including information about debits and credits to various accounts.
- Evaluate the income received from and the costs incurred in financing through notes payable, with an emphasis on the discounting of such notes.
Verified Answer
KC
katia cuenca noyolaMay 28, 2024
Final Answer :
A
Explanation :
When a discounted note is issued for borrowing purposes, the company receives cash (debit Cash) and recognizes the interest expense upfront for the discount (debit Interest Expense). The total value of the note is credited to Notes Payable, reflecting the liability to pay back the borrowed amount.
Learning Objectives
- Evaluate the income received from and the costs incurred in financing through notes payable, with an emphasis on the discounting of such notes.
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