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

Multiple Choice

Jacobs Company issued bonds with $300,000 face value on January 1,2016.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 of amortization.Based on this information alone,the recognition of interest expense on December 31,2016 would act to:

A) Decrease equity by $25,800,decrease liabilities by $1,200,and decrease assets by $27,000.
B) Decrease both assets and equity by $2,700.
C) Decrease both assets and equity by $25,800.
D) Increase liabilities by $1,200,decrease assets by $25,800,and decrease equity by $27,000.