1-A

On January 1, Year 1, Young Company issued bonds with a face value of $300,000, a stated rate of interest of 7 percent, and a 10-year term to maturity. Interest is payable in cash on December 31 of each year. The effective rate of interest was 6 percent at the time the bonds were issued. The bonds sold for $322,080. Young used the effective interest rate method to amortize the bond premium. Required a. Determine the amount of the premium on the day of issue. b. Determine the carrying value (face value less discount or plus premium) of the bond liability as of December 31, Year 1. c. Determine the amount of interest expense reported on the Year 1 income statement. d. Determine the carrying value (face value less discount or plus premium) of the bond liability as of December 31, Year 2. e. Determine the amount of interest expense reported on the Year 2 income statement.

1-B

The Year 2 income statement is shown next. Required a. Prepare the operating activities section of the statement of cash flows using the direct method. b. Prepare the operating activities section of the statement of cash flows using the indirect method. The Year 2 income statement is shown next. Required a. Prepare the operating activities section of the statement of cash flows using the direct method. b. Prepare the operating activities section of the statement of cash flows using the indirect method