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13 November, 01:44

On July 1, Shady Creek Resort borrowed $340,000 cash by signing a 10-year, 9% installment note requiring equal payments each June 30 of $52,979. What is the journal entry to record the first annual payment? a. Debit Cash $340,000, debit Interest Expense $52,979, credit Notes Payable $392,979. b. Debit Interest Expense $52,979; credit Cash $52,979. c. Debit Interest Expense $30,600; credit Cash $30,600. d. Debit Interest Expense $30,600; debit Interest Payable $22,379, credit Cash $52,979.

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  1. 13 November, 01:57
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    The journal entry is shown below:

    Interest Expense A/c Dr $30,600

    Note Payable A/c Dr $22,379

    To Cash A/c $52,979

    (Being payment of the first installment is recorded and the remaining balance is debited to note payable account)

    The interest expense is computed below:

    = Principal * rate of interest * number of months : (total number of months in a year)

    = $340,000 * 9% * (12 months : 12 months)

    = $30,600
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