On October 1,a $30,000,6%,3-Year Installment Note Payable Is Issued by a Company.The

question 13

Multiple Choice

On October 1,a $30,000,6%,3-year installment note payable is issued by a company.The note requires that $10,000 of principal plus accrued interest be paid at the end of each year on September 30.The issuer's journal entry to record the second annual interest payment would include:

• A)A debit to Interest Expense for $1,800
• B)A debit to Interest Expense for $1,200
• C)A credit to Cash for $11,800
• D)A credit to Cash for $10,000
• E)A debit to Notes Payable for $1,200

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Definitions:

Recorded When Earned

A principle indicating that revenue should be recognized in the accounting period in which it is earned, regardless of when the cash is received.

Accrued Revenues

Revenues that have been earned by providing goods or services but have not yet been received or recorded.

Cash Receipts

Cash receipts are the records of all cash inflows, representing money received by a business, typically from its operational activities like sales or services.

Accrue Employee Salaries

The process of recognizing the cost of salaries earned by employees but not yet paid to them.