On January 1 Year 1, Gordon Corporation issued bonds with a…
On January 1 Year 1, Gordon Corporation issued bonds with a face value of $70,000, a stated rate of interest of 6%, and a 5-year term to maturity. The bonds were issued at 98. Interest is payable in cash on December 31 each year. Gordon uses the straight-line method to amortize bond discounts and premiums.Which of the following shows the effect of the bond issuance on the financial statements? Balance SheetIncome StatementStatement of Cash FlowsAssets=Liabilities+Stockholders’ EquityRevenue−Expenses=Net IncomeA.70,000=70,000+ − = 70,000 FAB.68,600=68,600+ − = 68,600 FAC.68,600=70,000+(1,400) −1,400=(1,400)68,600 FAD.70,000=68,600+1,400 −(1,400)=1,40070,000 FA