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

Question

Tanner Christian

Business

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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Answers (1)

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Waylon Blair · Answer 1

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))