On October 1, Sam's Painting Service borrows $100,000 from National Bank on a 3-month, $100,000, 4% note. The entry by Sam's Painting Service to record payment of the note and accrued interest on January 1 is
A) Notes Payable 101,000 Cash 101,000
B) Notes Payable 100,000 Interest Payable 1,000
Cash 101,000
C) Notes Payable 100,000 Interest Payable 4,000
Cash 104,000
D) Notes Payable 100,000 Interest Expense 1,000
Cash 101,000

Question

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The note is for $100,000 with a 4% annual interest rate. For 3 months, the interest is $1,000 (100,000 * 4% * 3/12). The entry includes paying off the note and the accrued interest.

On October 1, Sam's Painting Service Borrows $100,000 from National