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Pluto Co.borrowed $25,000 on September 1, 2010 on a nine-month, 8% note.Interest and principal are due at maturity.
-The entry to record the transaction on September 1, 2010 would include a:
A)Debit to cash for $23,148
B)Credit to short-term notes payable for $25,000
C)Debit to interest expense for $1,500
D)Credit to interest payable for $1,852

Question

Quizplus · Accepted Answer

The entry for borrowing money includes a debit to cash for the amount received and a credit to a liability account for the amount borrowed. In this case, Pluto Co. borrowed $25,000, so the credit is to short-term notes payable for $25,000. No interest has accrued yet, so options C and D are not applicable. Option A is incorrect as it shows a debit to cash for a lesser amount than the amount borrowed.

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