Austral Electronics Company

Before Kim went to business school, she had a friend who worked for Austral Electronics Company $("$Austral$").$ As Kim recalled, during her friend's time with the company, it had issued a US $$1$ million equivalent local currency eight$-$year zero$-$coupon bond priced to yield $10\%$ at maturity. ${?}^5$

Kim had three questions for her study group: $(1)$ How should Austral have accounted for its zerocoupon bond at the issue date? $(2)$ How should the company have accounted for the zero$-$coupon bond at the end of the first year following it issuance? $(3)$ At the end of the third year?

Please answer the study group questions and the following three question

$1.$ How do you account for the zero coupon bond of austral electronics on issue date? $2.$ What would the journal entries be at the end of year $1$ and year $2?$