To purchase inventory on January 1, 2021, Safeway signed a $600,000, three-year, noninterest-bearing note with payment in full due December 31, 2023. Safeway typically borrows at an 8% interest rate but will only have to pay $600,000 at the maturity of the note.

Safeways journal entry on January 1, 2021 to record the transaction would include:

Multiple Choice

• a debit to Discount on notes payable for $123,701.

• a debit to Notes payable for $600,000.

• a credit to Notes payable or $476,299.

• a debit to Inventory for $600,000.