On January 1, Year 1, Barnes Company issued a $100,000 installment note. The note had a 10-year term and an 8 percent interest r
1 answer:
Answer:
(A) debit: interest expense $8,000; notes payable $6,903; credit: cash $14,903
Explanation:
Provided annual payment = $14,903
Interest for first year = $100,000 8% = $8,000
Therefore principal = $14,903 - $8,000 = $6,903
When the cash payment will be made, then
Interest as an expense amounting $8,000 will be debited as all expenses and losses are debited.
Principal payment of notes issued will also be debited, as this was liability and a part of liability is settled therefore, it will be reversal of creating liability that is debit by amount of $6,903
Also there is cash payment therefore, because of cash payment asset will be decreased, cash account will be credited by amount = $14,903
Journal Entry
Interest Expense Dr. $8,000
Notes Payable Dr. $6,903
To Cash A/c $14,903
Therefore correct option is
(A) debit: interest expense $8,000; notes payable $6,903; credit: cash $14,903
You might be interested in
Answer:
Answer for the question:
oselli Animation plans to offer its employees a salary enhancement package that has revenue sharing as its main component. Specifically, the company will set aside 2% of total sales revenue for year-end bonuses. The sales are expected to be $5 million the first year, $5.5 million the second year, and amounts increasing by 10% each year for the next 5 years. At an interest rate of 6% per year, what is the equivalent annual worth in years 1 through 5 of the bonus package?
is given in the attachment.
Explanation:
