On the first day of the fiscal year, Hawthorne Company obtained an $88,000, 7-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 for $15,208
B) credit to notes payable for $10,808
C) debit to interest expense for $4,400
D) debit to notes payable for $15,208

Question

On the first day of the fiscal year, Hawthorne Company obtained an $88,000, 7-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 for $15,208
B)  credit to notes payable for $10,808
C)  debit to interest expense for $4,400
D)  debit to notes payable for $15,208

Quizplus · Accepted Answer

The journal entry Hawthorne would record to make the first annual payment due on the note would include a debit to Interest Expense for $4,400.

On the First Day of the Fiscal Year, Hawthorne Company