ABC, Inc. issued $5,000,000 face value, 20-year, 12% bonds on March 1, 2020 when the market rate of interest was 12%. Interest payments are due every February 28 and August 31. The company follows a calendar year.

Required:

Indicate the best answer for the effect of the following on the companys accounting equation. Identify each account title affected and dollar change, and whether it increased or decreased.

The issuance of the bonds on March 1, 2020.

		Increased the asset cash and liability bonds Payable for $5,000,000.
		Decreased the asset cash and liability bonds Payable for $5,000,000.
		Increased the asset cash and decreased liability bonds Payable for $5,000,000.
		Increased the asset cash for $5,000,000 and increased the liabilities bonds Payable for $4,700,000 and interest payable for $300,000.