A business makes a payment of $1,400 on a note payable, consisting of a $200 interest payment and a $1,200 principal payment. Which of the following journal entries would be recorded?
A)Cash is credited for $1,200; Interest Expense is credited for $200; and Notes Payable is debited for $1,400.
B)Notes Payable is credited for $1,200; Cash is credited for $200; and Interest Expense is debited for $1,400.
C)Cash is credited for $1,400; Notes payable is debited for $1,200; and Interest Expense is debited for $200.
D)Notes Payable is credited for $1,400; Cash is debited for $1,200; and Interest Expense is debited for $200.

Question

Quizplus · Accepted Answer

The correct journal entry records the cash payment as a credit of $1,400, with the principal portion reducing the Notes Payable account (debit $1,200) and the interest portion recorded as an Interest Expense (debit $200).

A Business Makes a Payment of $1,400 on a Note