A company issues a $1,000,000 three-year note. The stated and effective rate are both 10%. Which journal entry should be used to record the annual interest in year 3?

• Debit interest expense for $100,000; Credit cash for $100,000
• Debit interest expense for $300,000; Credit cash for $300,000
• Debit cash for $300,000; Credit interest Expense for $300,000
• Debit cash for $100,000; Credit interest Expense for $100,000

A ten-year $50,000 note payable was issued on April 1 of year 1 with an annual stated effective rate of 10%. The company uses a calendar year-end. What is the total amount of interest expense to be recorded on the Year 1 income statement?

• $1,250
• $3,333
• $3,750
• $5,000

Answer rating: 100% (QA)

Ans 1 Interest is to be recognized every year and not ... View the full answer