The financial statements for ABC Company are prepared on July 31, 2013 based on an accrual accounting basis. No interest for July has been paid for the monies borrowed under the three year promissory note signed on 1/1/13. The interest is due monthly based on the principal balance of $10,000 and an annual interest rate of 6%. How should ABC account for the interest?
a. Debit interest receivable and credit interest payable in the amount of $600 for each account.
b. Debit interest expense and credit interest payable in the amount of $50 for each account.
c. Do not record at this time. Record the interest when the bank sends the bill.
d. Debit interest payable and credit interest expense in the amount of $50 for each account.