Q26. Notes payable
On December 6, 20×1, Entity A purchased equipment and issued a non-interest-bearing promissory note with the following information.
(a) Face amount of the note: $79,000
(b) $79,000 was paid on the due date of the note: January 25, 20×2
What are the journal entries to be prepared on December 6, 20×1 and January 25, 20×2?
A26. The face amount of the note payable is recorded on the credit side.
(1) December 6, 20×1: to record the issuance of a promissory note
1. Increase in equipment (asset): debit
2. Increase in notes payable (liability): credit
(2) January 25, 20×2: to record the payment of notes payable
1. Decrease in notes payable (liability): debit
2. Decrease in cash (asset): credit