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On January 1, 2017, Trinity Company loaned $901,560 to Litton Industries in exchange for a 3 year, zero-interest-bearing note with a face amount, $1,200,000. The
On January 1, 2017, Trinity Company loaned $901,560 to Litton Industries in exchange for a 3 year, zero-interest-bearing note with a face amount, $1,200,000. The prevailing rate of interest for a loan of this type is 10%. The adjusting journal entry made by Litton at December 31, 2017 with regard to the note will include
| a debit to Interest Expense for $120,000. |
|
| a debit to Interest Expense for $29,850. |
|
| a credit to Discount on Notes Payable for $90,156. |
| a credit to Interest Payable for $60,000. |
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