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26 October, 12:00

On September 1, Vicario, Inc., borrows $100,000 from First National Bank at 6 percent annual interest. This note is due in 90 days. Prepare the September 1 journal entry for Vicario by selecting the account names from the drop-down menus and entering the dollar amounts in the debit or credit columns.

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  1. 26 October, 12:27
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    Sep 1st

    Debit Cash 100,000

    Credit Note Payable 100,000

    (to record 90-day note borrowing from First National Bank)

    Explanation:

    As at September 1, Vicario Inc receive the cash amount of $100,000 from First National Bank through Borrowing, the Cash account should be recorded up $100,000 (that is, Dr, as Cash is an asset account) to reflect the transaction.

    The offseting Credit entry will be recorded in Note Payable account (which is a liability account) to reflect the liability of $100,000 owed to the Bank.

    As at 1 September, the first day of assuming the debt, no interest expenses is incurred, so, no entry is needed to record interest expense.
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