The Gordon Corporation issued $70,000 of 6%, 5-year bonds on January 1, Year 1 at 98. The interest payments are due on December 31 each year. Gordon uses the straight-line method of amortization.

On December 31, Year 5, Gordon Corporation records interest and amortization. Immediately after that, Gordon pays off the bonds as scheduled. Which of the following answers shows the effect of the bond payoff on the financial statements?

	Balance Sheet					Income Statement					Statement of Cash Flows
	Assets	=	Liabilities	+	Stockholders' Equity	Revenue		Expense	=	Net Income
A.	(68,600)		(68,600)		n/a	n/a		n/a		n/a	(68,600) FA
B.	(68,600)		(68,600)		n/a	n/a		n/a		n/a	(6,600) OA
C.	(70,000)		(68,600)		(1,400)	n/a		1,400		(1,400)	(68,600) FA/(1,400) OA
D.	(70,000)		(70,000)		n/a	n/a		n/a		n/a	(68,600) FA/(1,400) OA

Multiple Choice

• Choice B

• Choice D

• Choice C

• Choice A