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18 March, 15:19

1. A bank loaned Darden Company $10,000 on a 1-year, 6% note, but deducted the interest in advance. The journal entry made by Darden to record receipt of the cash would include a a. an increase in Cash for $9,400 b. an increase in Cash for $600 c. a decrease in Notes Payable for $10,600 d. a decrease in Notes Payable for $9,400

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  1. 18 March, 15:21
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    The correct answer is option (a).

    Explanation:

    According to the scenario, the computation of the given data are as follows:

    Amount = $10,000

    Interest rate = 6%

    So total interest amount = $10,000 * 6% = $600

    So, the cash amount = $10,000 - $600 = $9,400

    So, it shows increase in cash for $9,400.

    The journal entry for the given data are as follows:

    Cash A/c Dr $9,400

    Interest A/c Dr $600

    To Notes payable A/c $10,000

    (Being the Notes payable is recorded))
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