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On June 30, Year 1, Cashews, Inc., issued $200,000 worth of 8% bonds at 100.000. Interest will be paid annually on June 30. For each item listed below, select the correct dollar amount and December 31 Year 1 financial statement for each line item. What is interest expense?

A. 16,000; Balance Sheet B. (16,000); Income Statement C. (8,000); Income Statement D. 8,000; Balance Sheet E. 200,000; Balance Sheet F. (16,000); Statement of Cash Flows G. 0; Statement of Cash Flows

What is the term used to refer to the ability of the firm to deduct interest payments to reduce its tax liability?

A) tax credits B) interest tax shield C) interest loophole D) tax forgiveness