Final answer:
The entry to record the payment of an interest-bearing note at maturity after all interest expense has been recognized is Notes Payable Cash Interest Payable. The correct answer is C.
Step-by-step explanation:
The entry to record the payment of an interest-bearing note at maturity after all interest expense has been recognized is:
c) Notes Payable Cash Interest Payable
When a company pays off an interest-bearing note at maturity, they need to record the transaction correctly. They will decrease the Notes Payable account, as the note is being paid off. They will also decrease the Cash account, as cash is being used to make the payment. Additionally, they will decrease the Interest Payable account, as all interest expense has been recognized up to the maturity date.
The correct accounting entry when paying an interest-bearing note at maturity is option b) Notes Payable - Interest Payable - Cash. This entry includes reducing liabilities and recognizing the outflow of cash. The context provided explains the basics of borrowing methods like bonds and their value to investors.
The question pertains to the correct accounting entry for the payment of an interest-bearing note at maturity when all interest expense has already been recognized. The correct entry for the payment of a note at maturity, including interest, would be option b) Notes Payable, Interest Payable, Cash. This reflects the reduction of the liability on the note (Notes Payable), the payment of interest that has accrued (Interest Payable), and the outflow of cash to settle these obligations (Cash).
Firms can borrow money once they demonstrate the ability to generate significant revenues or profits, essentially backing their promise to pay back with interest. The two main borrowing methods available to a firm are through banks and bonds. Bonds, in particular, are financial instruments where the issuer owes a debt to the bondholders and is obligated to pay them interest (the coupon) and repay the debt at a later date (the maturity date). The bond's value to investors is influenced by the face value, coupon rate, maturity date, and market interest rates.