Question

On March 1, 2018, Lewis Services issued a 6% long-term notes payable for $18,000. It is payableover a 3-year term in $6000 principal installments on March 1 of each year, beginning March 1, 2019.Which of the following entries needs to be made on March 1, 2018?A) Long-Term Notes Payable 6000Cash 6000B) Cash 18,000Long-Term Notes Payable 18,000C) Current Portion of Long-Term Notes Payable 18,000Long-Term Notes Payable 18,000D) Long-Term Notes Payable 18,000Accounts Payable 18,000

Answer 1

Answer:

B) Cash A/c Dr $18,000

          To Long-Term Notes Payable $18,000

Explanation:

Since we have to pass the journal entry for the beginning year, so we have to record the issued amount also,

The journal entry is shown below:

Cash A/c Dr             $18,000

    To Long-Term Notes Payable     $18,000

(Being long term notes payable)

The principal installment amount should not be considered in the recording of the journal entry. Hence, it is ignored.