On March 1, Year 3, A Company purchased for $5,000 a two-year certificate of deposit that paid 6 percent annual interest. On December 31, Year 3, the adjusting entry to record accrued interest would

a. increase assets and equity by $500.

b. increase assets and liabilities by $300.

c. increase assets and equity by $250.

d. increase assets and liabilities by $250.