On July 1, Shady Creek Resort borrowed $250,000 cash by signing a 10-year, 8% installment note requiring equal payments each June 30 of $37,258.
-What is the appropriate journal entry to record the issuance of the note?

Question

On July 1, Shady Creek Resort borrowed $250,000 cash by signing a 10-year, 8% installment note requiring equal payments each June 30 of $37,258. 
-What is the appropriate journal entry to record the issuance of the note?

Quizplus · Accepted Answer

The appropriate journal entry to record the issuance of the note would be to debit Cash $250,000 and credit Notes Payable $250,000. This is because the company borrowed $250,000 cash and must repay it over the next 10 years through equal annual payments on June 30th. The interest expense of $37,258 will be recognized each year as it is incurred, but it is not recorded at the time of issuance of the note. Therefore, choices A, B, and C are incorrect. Choice E is incorrect because it is reversing the debit and credit accounts.

On July 1, Shady Creek Resort Borrowed $250,000 Cash by Signing