Diaz Company issued bonds with a $76,000 face value on January 1, Year 1. The bonds had a 8 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 98. 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. Event Number 1. 2 Assets Effect of Transactions on Financial Statements Balance Sheet Liabilities + + + Stockholders' Equity Revenue Income Statement Expense Net Income - Statement of Cash Flows

Diaz Company issued bonds with a $76,000 tace value on January 1 , Year 1 . The bonds had a 8 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 98 . The straight-line method is used for amortization Reuired o. Use a financiat 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 inltials OA to designate operating activity, IA for investing activity, and FA for financing activity. Not all cells require input