Question

On January 1, Year 1, Stratton Company borrowed $190,000 on a 10-year, 9% installment note payable. The terms of the note require Stratton to pay 10 equal payments of $29,606 each December 31 for 10 years. The required general journal entry to record the payment on the note on December 31, Year 2 is: Multiple Choice Debit Interest Expense $17,100; debit Notes Payable $12,506; credit Cash $29,606. Debit Notes Payable $17,100; debit Interest Expense $12,506; credit Cash $29,606. Debit Interest Expense $15,974; debit Notes Payable $13,632; credit Cash $29,606. Debit Notes Payable $29,606; credit Cash $29,606. Debit Notes Payable $190,000; debit Interest Expense $10,606; credit Cash $29,606.

Answer 1

Debit Interest Expense $17,100; debit Notes Payable $12,506; credit Cash $29,606

Step-by-step explanation:

Preparation of the journal entry to record the payment on the note on December 31, Year 2

Based on the information given we were told that the Company borrowed the amount of $190,000 that has a 9% installment note payable in which the note require the company to pay the amount of $29,606 for 10 years which means that the Journal entry will be :

Debit Interest Expense $17,100

Debit Notes Payable $12,506

Credit Cash $29,606

Calculated as :

Calculation for Interest expense

Interest expense = $190,000 * 9%

Interest expense= $17,100

Calculation for Principal payment

Principal payment = $29,606- $17,100

Principal payment = $12,506