On March 1, Brutto Corp.issues a 3 year, 5%, $60,000 note payable.The terms of the note include monthly blended principal and interest payments of $1,799.The entry to record the first instalment payment will include a
A)debit to Notes Payable of $1,799.
B)debit to Cash of $1,799.
C)credit to Interest Expense of $3,000.
D)debit to Interest Expense of $250.

Question

Quizplus · Accepted Answer

The first installment payment includes both principal and interest. The interest expense for the first month is calculated as 5% annual interest on $60,000, divided by 12 months, which equals $250.