On September 1, Piano Keys Corp. borrowed $30,000 from their bank, and signed a 5%, 3-month bank

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Question:

On September 1, Piano Keys Corp. borrowed $30,000 from their bank, and signed a 5%, 3-month bank loan. Principal and interest are due on December 1. If Piano Keys prepares monthly financial statements, the adjusting entry that it should prepare for interest on September 30 would be

a. debit Bank Loan Payable, $375; credit cash. 5375.

b. debit Cash $30,000; credit Bank Loan Payable, 530,000

c. debit Interest Expense, $125: credit Interest Payable $125.

d. debit Interest Expense, 1,500; credit Interest Payable, $1.500.