On January 1, Year 1, Stratton Company borrowed $180,000 on a 10-year, 8% installment note payable. The terms of the note require Stratton to pay 10 equal payments of $26,825 each December 31 for 10 years. The required general journal entry to record the payment on the note on December 31, Year 2 is:
A. Debit Notes Payable $14,400; debit Interest Expense $12,425; credit Cash $26,825.
B. Debit Interest Expense $14,400; debit Notes Payable $12,425; credit Cash $26,825.
C. Debit Interest Expense $13,406; debit Notes Payable $13,419; credit Cash $26,825.
D. Debit Notes Payable $26,825; credit Cash $26,825.
E. Debit Notes Payable $180,000; debit Interest Expense $8825; credit Cash $26,825.
Answer: C
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