Asked by Adecel Rusty on Jun 12, 2024
Verified
Winkler Company borrows $85,000 and pledges its receivables as security.The journal entry to record this transaction would be:
A) Debit Cash of $85,000 and credit Accounts Receivable $85,000.
B) Debit Cash of $85,000 and credit Accounts Payable $85,000.
C) Debit Note Receivable $85,000 and credit Accounts Receivable $85,000.
D) Debit Cash $85,000 and credit Notes Payable $85,000.
E) Debit Accounts Receivable $85,000 and credit Notes Payable $85,000.
Pledges Receivables
Outstanding amounts owed to an organization based on pledges made by donors, often recognized in nonprofit accounting.
Journal Entry
The recording of financial transactions into accounting records, detailing the accounts that are affected and in what way.
Borrow
The act of receiving something of value in exchange for the promise to return it or its equivalent at a later date.
- Explain the techniques for transforming receivables into cash prior to their due date and examine the consequences on accounting.
Verified Answer
JV
Jasmine VogelJun 17, 2024
Final Answer :
D
Explanation :
When a company borrows money and pledges its receivables as security, it creates a notes payable. Therefore, the journal entry to record this transaction would be to debit cash for the amount received and credit notes payable for the amount borrowed.
Learning Objectives
- Explain the techniques for transforming receivables into cash prior to their due date and examine the consequences on accounting.