Omaha Bank lends Nebraska Paper Company $100,000 on January 1. Nebraska Paper Company signs a $100,000, 8%, 6-month note. The entry made by Nebraska Paper Company on January 1 to record the proceeds and issuance of the note would include:

Question

Quizplus · Accepted Answer

When Nebraska Paper Company takes out a loan of $100,000 from Omaha Bank, it creates a liability for itself in the form of a note payable of $100,000. Therefore, Nebraska Paper Company should record a credit to Notes Payable for $100,000 to reflect this liability. There is no indication that the loan has a discount, so options A and B are not applicable. Additionally, interest expense and interest payable would be recorded at the end of the term, not at the issuance of the note. Therefore, the correct answer is C.

Omaha Bank Lends Nebraska Paper Company $100,000 on January 1