Question

question 2 (2.5 points) when a company pays an interest - bearing note payable on the due date, the journal entry on the books of the company making the payment includes: debiting notes payable and interest expense and crediting cash debiting cash and crediting notes payable and interest expense debiting notes payable and cash and crediting interest revenue debiting cash and interest expense and crediting notes payable

Explanation:

When a company pays an interest - bearing note payable on the due date, it reduces its liability (Notes Payable) and incurs an interest expense. Cash is decreased as it is used for the payment. Debiting Notes Payable and Interest Expense and crediting Cash is the correct journal entry. Debiting Cash would increase it which is incorrect in this payment scenario. Also, interest is an expense not revenue in this context for the paying company.

Answer:

A. debiting Notes Payable and Interest Expense and crediting Cash