The journal entry to record the conversion of a $6,300 account payable to a note payable would be
A)Cash 6,300Notes Payable 6,300
B)Notes Receivable 6,300Notes Payable 6,300
C)Notes Payable 6,300Cash 6,300
D)Accounts Payable 6,300Notes Payable 6,300

Question

The journal entry to record the conversion of a $6,300 account payable to a note payable would be​
A)Cash 6,300Notes Payable 6,300​
B)Notes Receivable 6,300Notes Payable 6,300​
C)Notes Payable 6,300Cash 6,300​
D)Accounts Payable 6,300Notes Payable 6,300

Quizplus · Accepted Answer

When converting an account payable to a note payable, the liability is simply being reclassified from one type to another. Therefore, the entry debits Accounts Payable to remove the liability under that classification and credits Notes Payable to establish the liability under the new classification.

The Journal Entry to Record the Conversion of a $6,300