On 1 July 2016, Donovan obtained a bank loan of $100 000 at 12


Question Description:

24.99

On 1 July 2016, Donovan obtained a bank loan of $100 000 at 12 percent interest, payable yearly in arrears. The accounting year-end is 31 December. Question: Prepare the journal entry for 1 July 2017, when the first interest payment was made. Answer: DR Interest expense $6 000 DR Interest payable $6 000 CR Cash $12 000 Why is $12,000 cash credited when only $6,000 is paid? Where does the $6,000 cash for interest expense go?

Answer

24.99