On 1 January 2010, Elegant Fragrances Company issues £1,000,000 face value, five-year bonds with annual interest payments of £55,000 to be paid each 31 December. The market interest rate is 6.0 percent. Using the effective interest rate method of amortisation, Elegant Fragrances is most likely to record:

A. an interest expense of £55,000 on its 2010 income statement.

B. a liability of £982,674 on the 31 December 2010 balance sheet.

C. a £58,736 cash outflow from operating activity on the 2010 statement of cash flows.