On january 1, year 1, barnes company issued a $100,000 installment note. the note had a 10-year term and an 8 percent interest rate. barnes agreed to repay the principal and interest in 10 payments of $14,903 at the end of each year. which of the following shows the journal entry necessary to recognize the cash payment on december 31, year 1? note: the amounts shown in the journal entries are rounded to the nearest whole dollar.(a) debit: interest expense $8,000; notes payable $6,903; credit: cash $14,903(b) debit: interest expense $8,000; cash $6,903; credit: notes payable $14,903(c) debit: interest expense $14,903; credit: cash $14,903(d) debit: notes payable $14,903; credit: cash $14,903

(A) debit: interest expense $8,000; notes payable $6,903; credit: cash $14,903

Explanation:

Provided annual payment = $14,903

Interest for first year = $100,000 8% = $8,000

Therefore principal = $14,903 - $8,000 = $6,903

When the cash payment will be made, then

Interest as an expense amounting $8,000 will be debited as all expenses and losses are debited.

Principal payment of notes issued will also be debited, as this was liability and a part of liability is settled therefore, it will be reversal of creating liability that is debit by amount of $6,903

Also there is cash payment therefore, because of cash payment asset will be decreased, cash account will be credited by amount = $14,903

Journal Entry

Interest Expense Dr. $8,000

Notes Payable Dr. $6,903

               To Cash A/c                     $14,903

Therefore correct option is

(A) debit: interest expense $8,000; notes payable $6,903; credit: cash $14,903

rational decision making is a multi-step process for making choices between alternatives. the process of rational decision making favors logic, objectivity, and analysis over subjectivity and insight. the word “rational” in this context does not mean sane or clear-headed as it does in the colloquial sense.

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a

explanation:

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