Winkler Company borrows $85,000 and pledges its receivables as security.The journal entry to record this transaction would be:
A)Debit Cash of $85,000 and credit Accounts Receivable $85,000.
B)Debit Cash of $85,000 and credit Accounts Payable $85,000.
C)Debit Note Receivable $85,000 and credit Accounts Receivable $85,000.
D)Debit Cash $85,000 and credit Notes Payable $85,000.
E)Debit Accounts Receivable $85,000 and credit Notes Payable $85,000.

Question

Quizplus · Accepted Answer

The correct entry is to debit Cash for the amount received and credit Notes Payable for the liability incurred, as the receivables are pledged as security, not sold or transferred.

Winkler Company Borrows $85,000 and Pledges Its Receivables as Security