On January 1, Year 1, Valley Enterprises issued bonds with a face value of $60,000, a stated rate of interest of 8 percent, and a five-year term to maturity. Interest is payable in cash on December 31 of each year. The effective rate of interest was 9 percent at the time the bonds were issued. The bonds sold for $57,666. Valley used the effective interest rate method to amortize the bond discount.

b. What item(s) in the table would appear on the Year 2 balance sheet?
c. What item(s) in the table would appear on the Year 2 income statement?
d. What item(s) in the table would appear on the Year 2 statement of cash flows?

Transcribed Image Text:

Cash Payment Interest Expense Discount Amortization Carrying Value January 1, Year 1 December 31, Year 1 December 31, Year 2 December 31, Year 3 December 31, Year 4 December 31, Year 5 Totals 57,666 58,056 4,800 390 5,190 ? ? ? ? ? 26,334 2,334 24,000