The correct answer among the above listed choices is letter b. Recording interest expense has an effect to decrease equity.Interest Expense
-it is the cost of borrowing money to an entity in a specified period of time. Interest is usually running every day but usually paid monthly, quarterly, semiannually, or annually depending on the agreement.
-this is recorded as a non-operating expense in the income statement.
The interest expense formula is:
Interest expense = (Days during which funds were borrowed ÷ 365 Days) x Interest rate x Principal
Interest Expense will usuallyincrease expenseeither increase liabilities or decrease assetsdecrease owners' equity
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