The Gordon Corporation issued $70,000 of 6%, 5-year bonds on January 1, Year 1 at 98. The interest payments are due on December 31 each year. Gordon uses the straight-line method of amortization. Which of the following answers shows the effect of the bond issuance on the financial statements?

Question

Quizplus · Accepted Answer

$70,000 × 98% = $68,600 issue price. The bond issuance increases assets (cash) and increases liabilities (bonds payable minus discount on bonds payable). It is reported as a cash inflow for financing activities on the statement of cash flows.

The Gordon Corporation Issued $70,000 of 6%, 5-Year Bonds on January