The journal entry a company uses to record the payment of an interest-bearing note is
A) debit Cash; credit Notes Payable
B) debit Accounts Payable; credit Cash
C) debit Notes Payable and Interest Expense; credit Cash
D) debit Notes Payable and Interest Receivable; credit Cash

Question

Quizplus · Accepted Answer

The payment of an interest-bearing note involves two components - the principal amount and the interest expense. Therefore, Notes Payable and Interest Expense accounts need to be debited. Cash account needs to be credited as the note is being paid off.

The Journal Entry a Company Uses to Record the Payment