On January 1, 2011, Gemstone Company Obtained a $280,000, 10-Year

question 147

Multiple Choice

On January 1, 2011, Gemstone Company obtained a $280,000, 10-year, 11% installment note from Guarantee Bank. The note requires annual payments of $47,544, with the first payment occurring on the last day of the fiscal year. The first payment consists of interest of $30,800 and principal repayment of $16,744. The journal entry to record the payment of the first annual amount due on the note would include:

• A) a credit to cash of $16,744
• B) a credit to Interest Payable of $30,800
• C) a debit to Notes Payable of $16,744
• D) a debit to Interest Expense of $47,544