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.

Which of the following answers shows the effect of the first interest payment and amortization of premium or discount?

	Balance Sheet					Income Statement					Statement of Cash Flows
	Assets	=	Liabilities	+	Stockholders' Equity	Revenue		Expense	=	Net Income
A.	(4,200)		(4,200)		n/a	n/a		n/a		n/a	(4,200) FA
B.	(4,480)		(280)		(4,200)	n/a		4,200		(4,200)	(4,480) FA
C.	(4,480)		(280)		(4,200)	n/a		4,200		(4,200)	(4,200) OA/(280) FA
D.	(4,200)		280		(4,480)	n/a		4,480		(4,480)	(4,200) OA

Multiple Choice

• Choice C

• Choice B

• Choice D

• Choice A