Diaz Company issued bonds with a $$145,000$ face value on January $1,$ Year $1.$ The bonds had a $9$ percent stated rate of interest and a

$10-$year term. Interest is paid in cash annually, beginning December $31,$ Year $1.$ The bonds were issued at $96.$ The straight$-$line method is

used for amortization.

Required

a$.$ Use a financial statements model like the one shown next to demonstrate how $(1)$ the January $1,$ Year $1,$ bond issue and $(2)$ the

December $31,$ Year $1,$ recognition of interest expense, including the amortization of the discount and the cash payment, affect the

company's financial statements.

Note: Use $+$ for increase or $-$ for decrease. In the Statement of Cash Flows column, use the initials OA to designate operating

activity, IA for investing activity, and FA for financing activity. Not all cells require input. 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.