On 1 January 2008, Elegant Fragrances Company issues $1 million worth of five-year bonds with annual interest payments of $55,000 paid each 31 December. The market interest rate is 6.0 percent. Using the effective interest rate method of amortizing, Elegant Fragrances is most likely to record
a. interest expense of $55,000 on its 2008 income statement.
b. a liability of $982,674 on the 31 December 2008 balance sheet.
c. a $58,736 cash outflow from operating activity on the 2008 statement of cash flows.