Greeson Corp. signed a four-month, zero-interest-bearing note on December 1, 201

Question

Greeson Corp. signed a four-month, zero-interest-bearing note on December 1, 2017 for the purchase of $500,000 of inventory. The face value of the note was $507,800. Assuming Greeson used a “Discount on Note Payable” account to initially record the note and that the discount will be amortized equally over the 4-month period, the adjusting entry made at December 31, 2017 will include a

a.   credit to Discount on Note Payable for $3,900.

b.   debit to Interest Expense for $5,850.

c.   credit to Discount on Note Payable for $1,950.

d.   debit to Interest Expense for $7,800

Explanation / Answer

Journal entry :

so answer is c) credit to Discount on Note Payable for $1,950.

Date accounts & explanation debit Credit Dec 1,2017 Inventory 500000 Discount on notes payable 7800 Notes payable 507800 Dec 31,2017 Interest expense (7800/4) 1950 Discount on notes payable 1950

Related Questions

Navigate

• Browse (All)
• Browse G
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.