On July 1, Shady Creek Resort borrowed $390,000 cash by signing a 10-year, 9% installment note requiring equal payments each June 30 of $60,770. What is the journal entry to record the first annual payment?

Multiple Choice

• Debit Interest Expense $35,100; credit Cash $35,100.

• Debit Interest Expense $35,100; debit Interest Payable $25,670; credit Cash $60,770.

• Debit Cash $390,000; debit Interest Expense $60,770; credit Notes Payable $450,770.

• Debit Interest Expense $60,770; credit Cash $60,770.

• Debit Interest Expense $35,100; debit Notes Payable $25,670; credit Cash $60,770.