Brian Inc.borrowed $8,000 from First Bank and signed a promissory note.What entry should First Bank record?
A)Debit Cash,$8,000;Credit Notes Receivable,$8,000.
B)Debit Notes Receivable,$8,000;Credit Cash,$8,000.
C)Debit Cash,$8,000;Credit Notes Payable,$8,000.

Question

Quizplus · Accepted Answer

When a borrower signs a promissory note, it is a promise to pay a certain amount to the lender on a specified due date. Therefore, the bank (lender) should record the promissory note as a Notes Receivable. The bank received cash, so it should be credited for the amount received. Thus, the correct entry would be to debit Notes Receivable for $8,000 and credit Cash for $8,000.

Brian IncBorrowed $8,000 from First Bank and Signed a Promissory Note