On May 22, Jarrett Company borrows $7,500 from Fairmont Financing, signing a 90-day, 8%, $7,500 note. What is the journal entry needed to record the transaction by Jarrett Company

Debit cash with $7,500

Credit notes payable with $7,500

Explanation:

The journal entry needed to record the transaction by Jarret company is

Cash account. Dr $7,500

Notes payable account $7,500

Since Jarret company borrowed $7,500, it means an increase in cash hence increase in asset will be debited. Cash will therefore be debited. Because the company signed a note payable against cash, it means note payable account will be credited.

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