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Prepare journal entries for the below transactions. a. Borrowed cash from a bank and signed a...

Question:

Prepare journal entries for the below transactions.

a. Borrowed cash from a bank and signed a note for $11,900.

b. Paid the bank the amount borrowed in (a).

c. Purchased $9,800 of equipment, paying $4,900 in cash and signing a note due to the manufacturer.

Notes Payable:

Notes payable is a liability account which represents the value of the promissory notes issued by a company. The existence of a written promise to pay, the promissory note, is what separates these liabilities from accounts payable. Notes sometimes carry an interest rate, but not always.

Answer and Explanation:

Entry Account Debit Credit Explanation
a. Cash $11,900 Record inflow of cash from borrowing
Notes Payable $11,900 Record value of note payable
b. Notes Payable $11,900 Remove note upon payment
Cash $11,900 Record outflow of cash made in payment of note
c. Equipment $9,800 Record value of equipment purchased
Cash $4,900 Record outflow of cash made to purchase equipment
Notes Payable $4,900 Record value of note signed for remaining balance ($9,800 - $4,900)

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