Hamada Company borrows $20,000 on October 1 from Arab bank by signing a $20,000, 10%, six month note payable. The journal entry to record accrued interest at December 31, assuming adjusting entries are made only at the end of the year is:

a.

Debit Interest payable 500 and credit Interest expense 500

b.

Debit Interest expense 2,000 and credit Interest payable 2,000

c.

Debit Interest expense 1,000 and credit Interest payable 1,000

d.

Debit Interest expense 500 and credit Interest payable 500