Question

Ontario Resources, a natural energy supplier, borrowed $80.9 million cash on November 1, 2021, to fund a geological survey. The loan was made by Quebec Banque under a short-term financing arrangement. Ontario Resources issued a 9-month, 12% promissory note with interest payable at maturity. Ontario Resources' fiscal period is the calendar year. Required: 1. Prepare the journal entry for the issuance of the note by Ontario Resources. 2.

Answer 1

Date Account Title Debit Credit

Nov.1 2021 Cash $80,900,000

Notes Payable $80,900,000

When the note is issued, Ontario resources gained $80.9 million in cash so the Cash account needs to be debited to reflect this.

The Notes Payable account will be credited for the same amount because credit balances like liabilities - which is what a note is - are credited when they increase.