A Business Makes a Payment of $1,200 on a Note

question 29

Multiple Choice

A business makes a payment of $1,200 on a note payable,consisting of a $200 interest payment and a $1,000 principal payment.Which of the following journal entries would be recorded?

• A) \[\begin{array} { | l | r | r | }
• \hline \text { Notes payable } & 1,000 & \\
• \hline \text { Interest expense } & 200 & \\
• \hline \text { Cash } & & 1,200 \\
• \hline
• \end{array}\]
• B) \[\begin{array} { | c | r | r | }
• \hline \text { Cash } & 1,200 & \\
• \hline \text { Notes payable } & & 1,000 \\
• \hline \text { Interest expense } & & 200 \\
• \hline
• \end{array}\]
• C) \[\begin{array} { | l | r | r | }
• \hline \text { Notes payable } & 1,200 & \\
• \hline \text { Cash } & & 1,000 \\
• \hline \text { Interest expense } & & 200 \\
• \hline
• \end{array}\]
• D) \[\begin{array} { | c | r | r | }
• \hline \text { Cash } & 1,000 & \\
• \hline \text { Notes payable } & & 1,200 \\
• \hline \text { Interest expense } & & 200 \\
• \hline
• \end{array}\]

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Definitions:

Market-Clearing Price

The price at which the market is in equilibrium, that is, the quantity of a good or service demanded equals the quantity of that good or service supplied; also referred to as the equilibrium price.

ATM Transaction

A financial operation, such as withdrawing or depositing money, conducted through an Automated Teller Machine.

Total Surplus

The sum of consumer surplus and producer surplus, representing the total net benefit to society from the production and consumption of goods or services.

Quota

A government-imposed trade restriction that limits the number or monetary value of goods that can be imported or exported during a specific period.