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Ontario Resources, a natural energy supplier, borrowed $80.9 million cash on November 1, 2021, to fund a geological survey. The loan was made by Quebec Banque under a short-term financing arrangement. Ontario Resources issued a 9-month, 12% promissory note with interest payable at maturity. Ontario Resources' fiscal period is the calendar year. Required: 1. Prepare the journal entry for the issuance of the note by Ontario Resources. 2.

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Answer:

Date                  Account Title                                   Debit                    Credit

Nov.1 2021         Cash                                         $80,900,000

                         Notes Payable                                                       $80,900,000

When the note is issued, Ontario resources gained $80.9 million in cash so the Cash account needs to be debited to reflect this.

The Notes Payable account will be credited for the same amount because credit balances like liabilities -  which is what a note is - are credited when they increase.

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