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Question(s) / Instruction(s):

A company borrows $100,000 at 12% annual percentage rate interest on Jan 1, 2015.  Principal and interest are due on Dec 31, 2015.  What entry will the company make on Jan 31, 2015?
a)    Increase interest payable $1,000, decrease cash $1,000
b)    Increase interest payable $1,000, increase interest expense (decrease owners equity) $1,000
c)    No entry is made on Jan 31 because it does not have to be paid until Dec 31
d)    No entry is made on Jan 31 because the principal and interest owed were already recorded on Jan 1
e)    None of the above

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