On October 1, Steve's Carpet Service borrows $350,000 from First National Bank on a 3-month, $350,000, 8% note.The entry by Steve's Carpet Service to record payment of the note and accrued interest on January 1 is

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Option B is the correct option. Steve's Carpet Service would debit the Notes Payable account for the principal amount of $350,000 and the Interest Expense account for the accrued interest of ($350,000 x 8% x 3/12 = $7,000). The company would credit Cash for the total payment of $357,000.

On October 1, Steve's Carpet Service Borrows $350,000 from First