On October 1 Eli's Carpet Service Borrows $125000 from First $\begin{array}{lrr} \text { Interest Payable } &2,500\\ \text { Interest Expense } &&2,500\\\end{array}$

Short Answer

On October 1 Eli's Carpet Service borrows $125000 from First District Bank on a 3-month $125000 8% note. What entry must Eli's Carpet Service make on December 31 before financial statements are prepared?
a.
$\begin{array}{lrr} \text { Interest Payable } &2,500\\ \text { Interest Expense } &&2,500\\\end{array}$

b.
$\begin{array}{lrr} \text { Interest Expense } &10,000\\ \text {Interest Payable } &&10,000\\\end{array}$

c.
$\begin{array}{lrr} \text { Interest Expense } &2,500\\ \text { Interest Payable } &&2,500\\\end{array}$

d.
$\begin{array}{lrr} \text { Interest Expense } &2,500\\ \text { Notes Payable } &&2,500\\\end{array}$