multiple select question select all that apply on november 1, year 1, abc corp. borrowed $100,000 cash on a…

multiple select question select all that apply on november 1, year 1, abc corp. borrowed $100,000 cash on a 1 - year, 6% note payable that requires abc to pay both principal and interest on october 31, year 2. the journal entry on november 1, year 1 would include which of the following? debit to interest expense $6,000 credit to note payable $100,000 credit to note payable $106,000 debit to cash $100,000

multiple select question select all that apply on november 1, year 1, abc corp. borrowed $100,000 cash on a 1 - year, 6% note payable that requires abc to pay both principal and interest on october 31, year 2. the journal entry on november 1, year 1 would include which of the following? debit to interest expense $6,000 credit to note payable $100,000 credit to note payable $106,000 debit to cash $100,000

Answer

Explanation:

Step1: Analyze cash - receipt

When the company borrows cash, it receives cash. So, it debits the Cash account for the amount of cash received, which is $100,000. Debit to Cash $100,000

Step2: Analyze note - payable

The company incurs a liability in the form of a note payable. The principal amount of the note is $100,000, so it credits the Note Payable account for $100,000. Credit to Note Payable $100,000

Step3: Analyze interest expense

On November 1, Year 1, no interest has been incurred yet, so there is no debit to Interest Expense at this time. Also, the credit to Note Payable is for the principal amount only, not the principal + interest.

Answer:

Debit to Cash $100,000, Credit to Note Payable $100,000