Kier Company Issued $700,000 in Bonds on January 1, Year $\begin{array}{cc} \text { Interest Expense } & \text { Cash Outflow } \\\end{array}$

Kier Company issued $700,000 in bonds on January 1, Year 1. The bonds were issued at face value and carried a 4-year term to maturity. They had a 6.50% stated rate of interest that was payable in cash on December 31st. Based on this information alone, the amount of interest expense shown on the December 31, Year 1 income statement and the cash flow from operating activities shown on the December 31, Year 1 statement of cash flows would be: $\begin{array}{cc} \text { Interest Expense } & \text { Cash Outflow } \\\end{array}$

A. $\begin{array}{cc}&\$45,500&&&&& \text { Zero } \\\end{array}$

B . $\begin{array}{cc}&\text { Zero } &&&&& \$45,500 \\\end{array}$

C. $\begin{array}{cc}&\$45,500 &&&& \$45,500 \\\end{array}$

D. $\begin{array}{cc}&\text { Zero } &&&&&\text { Zero } \\\end{array}$

A) Choice A
B) Choice B
C) Choice C
D) Choice D