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2 September, 15:59

On January 1, Year 1, Stratton Company borrowed $100,000 on a 10-year, 7% installment note payable. The terms of the note require Stratton to pay 10 equal payments of $14,238 each December 31 for 10 years. The required general journal entry to record the first payment on the note on December 31, Year 1 is:

1. Debit Interest Expense $7,000; debit Notes Payable $7,238; credit Cash $14,238.

2. Debit Notes Payable $7,000; debit Interest Expense $7,238; credit Cash $14,238.

3. Debit Notes Payable $10,000; debit Interest Expense $7,000; credit Gash $17,000.

4. Debit Notes Payable $14,238; credit Gash $14,238.

5. Debit Notes Payable $10,000; debit Interest Expense $4,238; credit Gash $14,238

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  1. 2 September, 16:13
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    1. Debit Interest Expense $7,000; debit Notes Payable $7,238; credit Cash $14,238.

    Explanation:

    The journal entry is shown below:

    Note payable A/c Dr $7,238

    Interest expense A/c Dr $7,000

    To Cash A/c $14,238

    (Being the first payment on the note is recorded)

    The computation of the interest expense is shown below:

    = Borrowed amount * rate of interest

    = $100,000 * 7%

    = $7,000

    And, the remaining balance left is reported in the note payable account
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