A is corrent. The requirement is to identify how the change in unamortized bond discount should be presented. The total amount of interest expense is subtracted to arrive at net income. However, only the coupon payment is paid during the current year. The $25,000 of the discount amortized during the period represents interest expensed but not yet paid. Therefore, A is corrent because the decrease in the discount account should be added to net income in the operating activities section of the statement of cash flows.
B is incorrect because the decrease in the discount account should be added to net income in the operating activities section of the statement of cash flows.
C is incorrect because the decrease in the discount account should be added to net income in the operating activities section of the statement of cash flows.
D is incorrect because the decrease in the discount account should be added to net income in the operating activities section of the statement of cash flows.
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