A company lends its supplier $150,000 for 3 years at a 6% annual interest rate.Interest payments are to be made twice a year.The company initially records the transaction by:

Question

Quizplus · Accepted Answer

The transaction involves a lending of money from the company to the supplier. Therefore, the company should debit Notes Receivable (asset account) for $150,000 (the amount lent) and credit Cash (asset account) for $150,000 (the amount received). The interest payments to be made twice a year will not affect the initial journal entry.

A Company Lends Its Supplier $150,000 for 3 Years at a 6