On October 1, Eli's Carpet Service borrows $300,000 from First National Bank on a 5-month, $120,000, 8% note. The entry by Eli's Carpet Service to record payment of the note and accrued interest on January 1 is

Select one:

a. Notes Payable....................................125,000 Interest Expense.............................. 2,500 Cash.................................................. 127,500

b. Notes Payable................................... 125,000 Interest Payable............................... 10,000 Cash..................................... 135,000

c.

Notes Payable..........................................125,000 Interest Payable..................................... 2,500 Cash.......................................................127,500

d. Notes Payable..............................................127,500 Cash........................................................ 127,500

e. The answer does not exist