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?
A)Debit Cash $7,500;credit Accounts Payable $7,500.
B)Debit Accounts Payable $7,500;credit Notes Payable $7,500.
C)Debit Cash $7,650;credit Notes Payable $7,650.
D)Debit Cash $7,500;credit Notes Payable $7,500.
E)Debit Notes Receivable $7,500;credit Cash $7,500.

Question

Quizplus · Accepted Answer

This transaction involves borrowing money from a financing company, which results in a notes payable for the borrower. The journal entry to record this transaction would be to debit cash for the amount borrowed ($7,500) and credit notes payable for the same amount ($7,500). Therefore, the best choice is D.

On May 22,Jarrett Company Borrows $7,500 from Fairmont Financing,signing a 90-Day,8%,$7,500