On January 1, Year 1, Pierce Corporation issued $25,000 in 8%, 5-year bonds payable at 102. Interest payments are due each December 31. Pierce uses the straight-line method to amortize bond discounts andpremiums.Which of the following shows the effect of the interest payment and amortization on December 31, Year 1?Assets = Liabilities +(160)(100)(100)n/aA. (2,000)B. (2,000)C. (2,000)D. (2,000)Multiple ChoiceOBalance SheetOOOOption BOption AOption DOption CStockholders'Equity(1,840)(1,900)(1,900)n/aRevenue(1,840)n/an/an/aIncome StatementExpense = Net Incomen/a(1,840)1,9001,900n/a(1,900)(1,900)n/aStatement of Cash Flows(2,000) FA(100) FA/(1,900) OA(2,000) OA(2,000) OA

Interest expense is Interest payment less amortization on bonds as the bonds were issued on a…

Answered: ome -) () () Statement of Cash Flows…

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Accounting

ome -) () () Statement of Cash Flows (2,000) FA (100) FA/(1,900) OA (2,000) OA (2,000) OA

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

On January 1, Year 1, Pierce Corporation issued $25,000 in 8%, 5-year bonds payable at 102. Interest payments are due each December 31. Pierce uses the straight-line method to amortize bond discounts and
premiums.
Which of the following shows the effect of the interest payment and amortization on December 31, Year 1?
Assets = Liabilities +
(160)
(100)
(100)
n/a
A. (2,000)
B. (2,000)
C. (2,000)
D. (2,000)
Multiple Choice
O
Balance Sheet
OOO
Option B
Option A
Option D
Option C
Stockholders'
Equity
(1,840)
(1,900)
(1,900)
n/a
Revenue
(1,840)
n/a
n/a
n/a
Income Statement
Expense = Net Income
n/a
(1,840)
1,900
1,900
n/a
(1,900)
(1,900)
n/a
Statement of Cash Flows
(2,000) FA
(100) FA/(1,900) OA
(2,000) OA
(2,000) OA

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