On the First Day of the Fiscal Year, Hawthorne Company

question 53

Multiple Choice

On the first day of the fiscal year, Hawthorne Company obtained a $ 88,000, seven-year, 5% installment note from Sea Side Bank. The note requires annual payments of $15,208, with the first payment occurring on the last day of the fiscal year. The first payment consists of interest of $4,400 and principal repayment of $10,808. The journal entry Hawthorne would record to make the first annual payment due on the note would include:

• A) a debit to Cash of $15,208
• B) a credit to Notes Payable for $10,808
• C) a debit to Interest Expense for $4,400
• D) a debit to Notes Payable for $15,208

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