On September 1, Kennedy Company loaned $100,000, at 12% annual interest, to a customer. Interest and principal will be collected when the loan matures one year from the issue date. Assuming adjustments are only made at year-end, what is the adjusting entry for accruing interest that Kennedy would need to make on December 31, the calendar year-end?

Multiple Choice

Debit Interest Expense, $12,000; credit Interest Payable, $12,000

Debit Interest Expense, $4,000; credit Interest Payable, $4,000

Debit Interest Receivable, $4,000; credit Interest Revenue, $4,000.

Debit Interest Receivable, $12,000; credit Cash, $12,000

Debit Cash, $4,000; credit Interest Revenue, $4,000.