Reference no: EM133160817

Question - Joe paid an installment loan payment of $25,000. $3,445 of the payment was interest and the remaining $21,555 was principal. How does this affect the General Ledger and Income Statement?

a. Cash is decreased $25,000 and Joe's Capital Account is decreased $25,000. The $25,000 will be expensed on the Income Statement.

b. Cash is decreased $25,000, the loan balance is decreased $21,555 and Joe's Capital Account is reduced $3,445. The $3,445 will be expensed on the Income Statement.

c. Cash is decreased $25,000, the loan balance is decreased $25,000 and Joe's Capital Account is reduced $3,445. The $3,445 will be expensed on the Income Statement.

d. Cash is decreased $25,000, the loan balance is decreased $3,445 and Joe's Capital Account is reduced $21,555. The $3,445 will be expensed on the Income Statement.