Answer:
Dr Interest expense $4,000
Dr Notes payable $1,120
Explanation:
The $5,120 repaid comprised of both interest and principal repayments,hence there is need for the amount to be split into the two appropriate accounts.
The interest payable on the loan on yearly basis ,based on the outstanding loan balance of $50,000 is $4,000(8%*$50,000),hence the balance of $1,120($5,120-$4,000) represents the actual repayment of principal,as a result the notes payable account should be debited with $1,120.
