Notes payable



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

  Debit Credit
Equipment 79,000  
     Notes payable   79,000

[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

  Debit Credit
Notes payable 79,000  
     Cash   79,000

[Note]
1. Decrease in notes payable (liability): debit
2. Decrease in cash (asset): credit

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