On July 1, Shady Creek Resort borrowed $320,000 cash by signing a 10-year, 8% in

Question

On July 1, Shady Creek Resort borrowed $320,000 cash by signing a 10-year, 8% installment note requiring equal payments each June 30 of $47,689. What is the journal entry to record the first annual payment? Multiple Choice Debit Cash $320,000; debit Interest Expense $47,689; credit Notes Payable $367,689. Debit Interest Expense $47,689; credit Cash $47,689. Debit Interest Expense $25,600; credit Cash $25,600. Debit Interest Expense $25,600; debit Interest Payable $22,089; credit Cash $47,689. Debit Interest Expense $25,600; debit Notes Payable $22,089; credit Cash $47,689.

Explanation / Answer

Interest portion for one year = 320000*8% = 25600

Total instalment paid = 47689

So,principal portion repaid = 47689 - 25600 = 22089

Journal entry

Interest expense Dr. 25600

Notes payable Dr. 22089

To Cash 47689

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