On May 22, Jarrett Company borrows $7,500 from Fairmont Financing, signing a 90-day, 8%, $7,500 note. What is the journal entry needed to record the transaction by Jarrett Company? Multiple Choice Debit Cash $7,500; credit Notes Payable $7,500. Debit Notes Receivable $7,500; credit Cash $7,500. Debit Cash $7,650; credit Notes Payable $7,650. Debit Cash $7,500; credit Accounts Payable $7,500. Debit Accounts Payable $7,500; credit Notes Payable $7,500.

Question

Business

Harrington

20 March, 17:17

On May 22, Jarrett Company borrows $7,500 from Fairmont Financing, signing a 90-day, 8%, $7,500 note. What is the journal entry needed to record the transaction by Jarrett Company? Multiple Choice Debit Cash $7,500; credit Notes Payable $7,500. Debit Notes Receivable $7,500; credit Cash $7,500. Debit Cash $7,650; credit Notes Payable $7,650. Debit Cash $7,500; credit Accounts Payable $7,500. Debit Accounts Payable $7,500; credit Notes Payable $7,500.

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Answers (1)

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Paisley Guzman · Answer 1

The correct answer is Debit Cash and Credit Noted Payable

Explanation:

The journal entry for borrowing the cash is as follows:

Cash A/c ... Dr $7,500

Notes Payable A/c ... Cr $7,500

As Jarrett company borrowed the amount of $7,500, so cash is increasing and any increase in asset account will be debited. Therefore, the cash account is debited. Whereas he signed a notes payable against the cash so notes payable account is credited.