1. Yeast Company issued a $5000 face value note payable to the State Bank on December 1, 2014. The note had a 12 percent annual rate of interest and a one year term. The adjusting entry to record accrued interest on December 31, 2014, would

		decrease liabilities by $50
		increase equity by $50
		increase net income by $50
		increase expenses by $50

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2.Yeast Company issued a $5000 face value note payable to the State Bank on December 1, 2014. The note had a 12 percent annual rate of interest and a one year term. The amount of cash paid for interest in 2015 is:

$550

$50

$600

none of the above