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Journal entry for discounted note?

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Question by Nick M: Journal entry for discounted note?
The journal entry a company uses to record the issuance of a discounted note for the purpose of borrowing funds for the business is

a. debit Cash and Interest Expense; credit Notes Payable

b. debit Cash and Interest Payable; credit Notes Payable

c. debit Accounts Payable; credit Notes Payable

d. debit Notes Payable; credit Cash

Best answer:

Answer by Old Guy
a.

Give your answer to this question below!

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  • EJ (Philippines)

    Answer:

    Suggested answer would have been:
    (Dr) Cash
    (Dr) Discount on notes payable
    (Cr) Notes Payable

    However, answer A is acceptable. Besides, the same could be corrected when adjusting entry is made.
    (Dr) Discount on notes payable
    (Cr) Interest expense

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