Answer :
The entry made by Guarantee Company on January 1 to record the proceeds and issuance of the note is c. Cash $121,417, Interest Expense $6,873, and Notes Payable $114,544.
This entry reflects the financial transactions related to the issuance of the note. Guarantee Company receives cash of $121,417, which represents the proceeds of the loan from Taylor Bank. This cash inflow is recorded as an increase in the company's cash account.
Additionally, Guarantee Company incurs interest expense of $6,873 at the time of issuing the note. The interest expense is calculated by multiplying the note amount of $114,544 by the interest rate of 8% and the time period of nine months (or 9/12, equivalent to 0.75).
The interest expense reflects the cost of borrowing and is recognized as an expense in the company's income statement. Finally, the company records the notes payable of $114,544, which represents the principal amount of the loan. Notes payable is a liability account that indicates the company's obligation to repay the borrowed funds to Taylor Bank within the specified time period.
In summary, the entry made by Guarantee Company on January 1 records the cash received, the interest expense incurred, and the notes payable related to the loan from Taylor Bank. This entry ensures accurate accounting of the financial transactions associated with the issuance of the note.
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