A Corporation Borrowed $125,000 Cash by Signing a 5-Year, 9

A corporation borrowed $125,000 cash by signing a 5-year, 9% installment note requiring equal annual payments each December 31 of $32,136. What journal entry would the issuer record for the first payment?

A) Debit Interest Expense $7,136; debit Notes Payable $25,000; credit Cash $32,136.
B) Debit Notes Payable $32,136; debit Interest Payable $11,250; credit Cash $43,386.
C) Debit Interest Expense $11,250; debit Notes Payable $20,886; credit Cash $32,136.
D) Debit Notes Payable $32,136; credit Cash $32,136.
E) Debit Notes Payable $11,250; credit Cash $11,250.Principal reduction = $32,136 - $11,250 = $20,886