Question

On November 1, 2018, Quantum Technology, a geothermal energy supplier, borrowed $16 million cash to fund a geological survey. The loan was made by Nevada BancCorp under a noncommitted short-term line of credit arrangement. Quantum issued a nine-month, 12% promissory note. Interest was payable at maturity. Quantum’s fiscal period is the calendar year.

Prepare the journal entry for the issuance of the note by Quantum Technology.

Answer 1

Explanation:

The journal entry to record the issuance of the note is shown below:

Cash Dr $16,000,000

     To Note payable $16,000,000

(Being the issuance of the note is recorded)

For recording this given transaction, we debited the cash account and credited the note payable account as both the asset account and the liabilities account are increased