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

Multiple Choice

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