A bank loaned York Construction Company $35,000 on a one-year,6% note,but deducted the interest in advance.The journal entry made by York to record receipt of the cash would include a(n)

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When a bank deducts interest in advance on a loan, the borrower records the interest as a "Discount on Notes Payable," which effectively reduces the carrying amount of the note. The interest for one year at 6% on $35,000 is $2,100 ($35,000 * 6%), which is deducted upfront, so the company receives less cash and records this $2,100 as an increase in "Discount on Notes Payable."

A Bank Loaned York Construction Company $35,000 on a One-Year,6