Question

On May​ 1, 2019, Mary Smith signed a promissory note with Continental Bank. The note is due in one year with ​% interest. What journal entry should Continental Bank prepare on May​ 1, 2019?

a. Debit Cash for $10,000 and credit Notes Payable for $10,000.
b. Debit Notes Receivable for $10,700 and credit Cash for $10,700.
c. Debit Notes Receivable for $10,000 and credit Cash for $10,000.
d. Debit Cash for $10,700 and credit Accounts Receivable for $10,700.

Answer 1

Answer: c. Debit Notes Receivable for $10,000 and credit Cash for $10,000

Step-by-step explanation:

Here is the completed question:

On May​ 1, 2019, Mary Smith signed a $10,000 promissory note with Continental Bank. The note is due in one year with ​7% interest. What journal entry should Continental Bank prepare on May​ 1, 2019?

The journal entry shows the transactions incurred by Mary Smith. It should be noted that a journal shows both the debit and credit side.

Based on the information in the question, the journal entry will be:

Debit Notes Receivable for $10,000 and credit Cash for $10,000

Therefore, option C is the correct answer.

Check the attachment for further detail.