On September 1, Year 1 Western Company borrowed $36,000 cash. The one-year note carried a 5% rate of interest. The amount of interest expense on the income statement and the amount of cash flow from operating activities shown on Western’s December 31, Year 1 financial statements would be
a. $600 interest expense and $1,800 cash outflow from operating activities.
b. $1,200 interest expense and $1,800 cash outflow from operating activities.
c. $600 interest expense and zero cash outflow from operating activities.
d. $1,200 interest expense and zero cash outflow from operating activities.