Which of the following shows how the cash payment and recognition of interest expense affects the elements of the financial statements when a bond is issued at a discount?

Question

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When interest expense is recognized the asset cash decreases, the carrying value of the bond liability increases (through a decrease in the bond discount), and stockholders' equity (retained earnings) decreases. On the income statement, interest expense increases which decreases net income. The payment of cash for interest is reported as a cash outflow for operating activities.

Which of the Following Shows How the Cash Payment and Recognition