On October 1,Angelica Inc.signs a note for $200,000 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 $200,000, debit Interest Expense for $14,000, credit Cash for $200,000, and credit Interest Payable for $14,000.
B) Accrued Interest and credit Cash for $14,000.
C) Cash and credit Notes Payable for $200,000.
D) Cash for $200,000, debit Interest Expense for $14,000, credit Notes Payable for $200,000, and credit Interest Payable $14,000.

Question

Quizplus · Accepted Answer

The issuance of the promissory note involves receiving cash, so Cash is debited and Notes Payable is credited for the principal amount of $200,000. Interest is not recorded at issuance.