On October 1,you Borrow $200,000 in Order to Build a New

question 135

Multiple Choice

On October 1,you borrow $200,000 in order to build a new facility.The loan is for 10 years,at 7% interest,and semiannual interest payments are due each April and October.The journal entry to record the issuance of the promissory note should:

• A)debit Notes Payable for $200,000,debit Interest Expense for $14,000,credit Cash for $200,000,and credit Interest Payable for $14,000.
• B)debit Accrued Interest for $14,000 and credit Cash for $14,000.
• C)debit Cash for $200,000 and credit Notes Payable for $200,000.
• D)debit Cash for $200,000,debit Interest Expense for $14,000,credit Notes Payable for $200,000,and credit Interest Payable $14,000.

---

Definitions:

Financing Activity

Transactions that result in changes in the size and composition of the equity capital or borrowings of a company.

Operating Activity

Transactions and events related to the primary operations of a business, such as selling products or services.

Revenue Activity

Activities undertaken by a business that result in the earning of income, typically from the sale of goods or provision of services.

Cash Investments

Financial assets such as stocks, bonds, or real estate purchased with the expectation of generating a return on investment.