Question

Brian Inc. borrowed $8,000 from First Bank and signed a promissory note. What entry should First Bank record?

(A) Debit Cash, $8,000; Credit Notes Payable, $8,000
(B) Debit Notes Receivable, $8,000; Credit Cash $8,000
(C) Debit Notes Payable, $8,000; Credit Cash, $8,000
(D) Debit Cash, $8,000; Credit Notes Receivable, $8,000

Answer 1

The correct answer is B

Step-by-step explanation:

First bank is the creditor of Brian Inc.. The entry that they should be recorded upon the transaction is to debit notes receivable, $8,000 and credit cash, $8,000. First bank should recognize an asset that is bound to be received upon the payment of the debtor (Brian Inc.), notes receivable (debit) and also should recognize the outflow of cash (credit) lent to Brian in the amount of $8,000.