Chordley Manufacturing Borrowed $12,000 from the Second National Bank of Tahoma

Multiple Choice

Chordley Manufacturing borrowed $12,000 from the Second National Bank of Tahoma on October 1,2012.The note carries an annual interest rate of 10%,which will be paid once a year on September 30.The company has not recognized any interest expense during 2012.What is the journal entry necessary to recognize interest expense as of December 31,2012?

A) $\begin{array}{lll}\text { } & \mathrm{Dr.}& \mathrm{Cr.}\\\text {Interest Expense } & 300 & \\\text { Interest Payable } & &300\\\end{array}$

B) $\begin{array}{lll}\text { } & \mathrm{Dr.}& \mathrm{Cr.}\\\text {Interest Expense } & 300 & \\\text { Notes Payable } & &300\\\end{array}$

C) $\begin{array}{lccc}\text { } & \mathrm{Dr.}& \mathrm{Cr.}\\\text {Interest Payable } & 300 & \\\text { Interest Expense} & &300\\\end{array}$

D) $\begin{array}{lccc}\text { } & \mathrm{Dr.}& \mathrm{Cr.}\\\text {Interest Expense } & 1,200 & \\\text { Interest Payable } & &1,200\\\end{array}$

E) $\begin{array}{lccc}\text { } & \mathrm{Dr.}& \mathrm{Cr.}\\\text {Interest Expense } & 1,200 & \\\text { Notes Payable } & &1,200\\\end{array}$