A $1,200,000 Note Payable Requires 10% Annual Interest with Interest

question 78

Multiple Choice

A $1,200,000 note payable requires 10% annual interest with interest due monthly on the 15^th of each month.An interest payment of $10,000 was made on April 15^th and $5,000 of interest expense was accrued in an adjusting entry on April 30^th.The company makes the next interest payment due on May 15.How would the company record this transaction?

• A)Debit Interest Expense for $5,000 and credit Cash for $5,000.
• B)Debit Interest Expense for $10,000 and credit Cash for $5,000.
• C)Debit Interest Payable for $10,000 and credit Cash for $10,000.
• D)Debit Interest Expense for $5,000,debit Interest Payable for $5,000,and credit cash for $10,000.
• E)Debit Interest Payable for $15,000,credit Cash for $10,000,and credit Interest Expense for $5,000.

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Definitions:

Predictions

Statements about future events or conditions that are expected to happen based on current evidence or hypotheses.

Classical Conditioning

A learning process where a neutral stimulus becomes associated with a meaningful stimulus and acquires the capacity to elicit similar responses.

Rescorla

A psychologist notable for his work with Robert A. Wagner on a model of classical conditioning that emphasizes the importance of the cognitive aspect of learning.

Prediction

A statement about what will happen in the future based on current understanding or analysis.