A bank loaned Shrugg Stone Company $35,000 on a 1-year,6% note,but deducted the interest in advance.The journal entry made by Shrugg Stone to record receipt of the cash would include an

Question

Quizplus · Accepted Answer

The interest of $2,100 ($35,000 x 6%) is deducted in advance, so the cash received is $32,900. The $2,100 is recorded as a Discount on Notes Payable, which is a contra liability account.

A Bank Loaned Shrugg Stone Company $35,000 on a 1-Year,6