A five-year, 6%, $50,000 note payable is issued on January 1. Terms include fixed annual principal payments of $10,000, plus interest on the outstanding balance. The entry to record the first instalment payment will include a
A)debit to Notes Payable of $10,000.
B)credit to Interest Expense of $3,000.
C)credit to Notes Payable of $13,000.
D)debit to Cash of $10,000.

Question

Quizplus · Accepted Answer

The first installment payment includes a reduction of the principal by $10,000, which is recorded as a debit to Notes Payable.

A Five-Year, 6%, $50,000 Note Payable Is Issued on January