Jansen Company Issued Bonds with $150,000 Face Value on January

Jansen Company issued bonds with $150,000 face value on January 1, 2013. The bonds were issued at 102 and carried a 5-year term to maturity. They had a 9% stated rate of interest that was payable in cash on December 31st of each year. Jansen uses the straight-line method of amortization. Based on this information alone, the recognition of interest expense on December 31, 2013 would act to:

A) Decrease both assets and equity by $13,500.
B) Decrease equity by $12,900, decrease liabilities by $600, and decrease assets by $13,500.
C) Decrease both assets and equity by $12,900.
D) Increase liabilities by $600, decrease assets by $12,900, and decrease equity by $13,500.

Correct Answer:

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