On October 1, Pinnacle Co. signs a note for $360,000 to provide the funds needed to...
On October 1, Pinnacle Co. signs a note for $360,000 to provide the funds needed to build a new facility. The note is due in 10 years, includes an annual interest rate at 7%, and requires semiannual interest payments each April and October. The journal entry to record the issuance of the promissory note should debit:
A. Notes Payable for $360,000, debit Interest Expense for $25,200, credit Cash for $360,000, and credit Interest Payable for $25,200.
B. Cash and credit Notes Payable for $360,000.
C. Cash for $360,000, debit Interest Expense for $25,200, credit Notes Payable for $360,000, and credit Interest Payable $25,200.
D. Accrued Interest and credit Cash for $25,200.
Homework Answers
at the time of issue of notes, interest amount will not be accrued. only cash account will debit and note payable account will credit for full amount. interest amount will record at the time of its accrual.
So, Answer will be: B. Cash and credit Notes Payable for $360,000
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