ABC Inc. decided to issue a bond on January 1^st, 2019 with a market interest rate of 6%. However, ABC Inc. decided to pay a coupon rate of 8%. The face-value of the bond was 10,000 dollars. This bond will be due on December 31^st, 2020 and will be paid semi-annually on June 30^th, and December 31^st. ABC Inc. uses the effective interest method.

On April 1^st, 2019, ABC Inc. also found out that the $14,000 value of Goodwill in Clearwater Inc. is actually worth $25,000 as ClearWaters brand popularity has increased a lot.

On Apr 30^th, 2019, ABC Inc. receives a notice from a real estate agent that the market value of the land that it bought from ClearWater Inc. for $10,000 is now worth $25,000 even after all the usage and wear and tear that happened on the land for the 4 months since Jan 1^st, 2019. The land is expected to be used for 25 more months.

On May 15^th, 2019 ABC Inc. gets hit with a major lawsuit from Hang Hau Inc. that accuses it of copying its patent for making screwdrivers. ABC Inc. believes that it has a 45% chance of losing the case and would end up paying $15,000 if it lost. The case will end December 31^st, 2019.

On May 31^st, 2019 ABC Inc. gets hit with a major lawsuit from Mong Kok Lawyers Inc. because of injuries caused to its workers who used the screwdrivers. ABC Inc. believes that it has a 51% chance of losing the case and would end up paying $10,000 if it lost. The case will end December 31^st, 2019.

Record all journal entries between January 1^st, 2019 and December 31^st, 2020. Please create the income statement, and cash flow statement of ABC Inc. as of June 30^th, 2019. (18 points)

Question 13 continued: ABC Inc. hires a new accountant who believes that the effective interest method is ineffective and straight-up tells the CFO that she believes that ABC Inc. needs to use the straight-line method. (10 points total)

1. By how much would the net-income of ABC Inc. change under this new method for the time period of January 1^st, 2019 through December 31^st, 2019 relative to the effective interest method? (2 points)

2. By how much would the net-income of ABC Inc. change under this new method for the time period of January 1^st, 2020 through December 31^st, 2020 relative to the effective interest method? (2 points)

3. By how much would the cash flow from operations of ABC Inc. change under this new method for the time period of January 1^st, 2019 through December 31^st, 2019 relative to the effective interest method? (2 points)

4. By how much would the total liabilities of ABC Inc. change under this new method for the time period as of December 31^st, 2019 relative to the effective interest method? (2 points)

By how much would the total liabilities of ABC Inc. change under this new method as of December 31^st, 2020 relative to the effective interest method? (2 points)

** no other additional information was given ):