The Journal Entry a Company Uses to Record the Payment

question 138

Multiple Choice

The journal entry a company uses to record the payment of a discounted note is

• A) debit Notes Payable and Interest Expense; credit Cash
• B) debit Notes Payable; credit Cash
• C) debit Cash; credit Notes Payable
• D) debit Accounts Payable; credit Cash

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Definitions:

Book Value

The net value of a company's assets as listed on the balance sheet, calculated as total assets minus intangible assets (like goodwill) and liabilities.

Interest Rate

The percentage at which interest is paid by a borrower for the use of money that they borrow from a lender.

Salvage Value

The estimated residual value of an asset at the end of its useful life, reflecting what the asset can be sold for or its scrap value.

Capital Lease

A lease agreement in which the lessee records the leased asset as an asset in its balance sheet, and the lease payment obligations as liabilities.