The entry to record an installment payment on a long-term note payable is
A) Mortgage Payable Cash
B) Interest Expense Cash
C) Mortgage Payable Interest Expense
Cash
D) Bonds Payable Cash

Question

Quizplus · Accepted Answer

When recording an installment payment on a long-term note payable, we need to account for both the principal amount and the interest expense. The principal amount is recorded as a reduction in the Mortgage Payable account, while the interest expense is recognized separately.

Option A is incorrect because it only accounts for the principal amount, ignoring the interest expense.

Option B is incorrect because it only accounts for the interest expense, ignoring the principal amount.

Option D is incorrect because it refers to "Bonds Payable" instead of "Mortgage Payable," which is the correct account for a long-term note payable.

Therefore, the best choice is C, which accounts for both the principal amount and the interest expense by reducing the Mortgage Payable account and recognizing the interest expense separately.

The Entry to Record an Installment Payment on a Long-Term