Jacobs Company Issued Bonds with a $300,000 Face Value on January

Jacobs Company issued bonds with a $300,000 face value on January 1, Year 1. 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. Jacobs uses the straight-line method to amortize bond discounts and premiums. Based on this information alone, how does the recognition of interest expense during Year 1 affect the company's accounting equation?

A) Decreases stockholders' equity by $25,800, decreases liabilities by $1,200, and decreases assets by $27,000
B) Decreases both assets and stockholders' equity by $2,700
C) Decreases both assets and stockholders' equity by $25,800
D) Increases liabilities by $1,200, decreases assets by $25,800, and decreases stockholders' equity by $27,000