Question

Marigold Corp. borrows $87,600 on July 1 from the bank by signing a $87,600, 10%, 1-year note payable. (a) Prepare the journal entry to record the proceeds of the note. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit July 1 enter an account title to record the proceeds of the note on July 1 enter a debit amount enter a credit amount enter an account title to record the proceeds of the note on July 1 enter a debit amount enter a credit amount (b)

Answer 1

The accounting entry to record the proceeds of the note on Jul 1st as below:

Dr Cash $87,600

Cr Notes Payable $87,600

Step-by-step explanation:

As Marigold Corp. borrows $87,600 from the bank, its cash will be increase by $87,600 as the Bank will transfer the borrowed fund to Marigold Corp. To illustrate the increase of $87,600 in Cash account, we debit Cash account.

At the same time, the liabilities of Marigold will also increase at the same amount of $87,600 to record the debt owed to the bank. We credited the Notes Payable account to capture the effect.

Interest expenses has not yet incurred at the time of note issuance. Thus, no entry is needed for interest expenses.