The Hawk Co.borrowed $30,000 from a bank,depositing those funds in its bank account and signing a formal agreement to repay the loan in two years.What is the correct journal entry for this transaction?
A) Debit notes payable and credit cash for $30,000
B) Debit notes payable and debit cash for $30,000
C) Credit notes payable and credit cash for $30,000
D) Debit cash and credit notes payable for $30,000

Question

Quizplus · Accepted Answer

When the Hawk Co. borrowed $30,000 from the bank and deposited it in its bank account, the journal entry would be to debit the cash account for $30,000 (as it is an inflow of cash into the account) and to credit the notes payable account (as it is an increase in liabilities due to the loan) for $30,000. Therefore, option D, i.e. "Debit cash and credit notes payable for $30,000" is the correct journal entry for this transaction.