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Diaz Company issued bonds with a $93,000 face value on January 1. Year 1 . The bonds had a 7 percent stated rate of interest
Diaz Company issued bonds with a $93,000 face value on January 1. Year 1 . The bonds had a 7 percent stated rate of interest and a 10 year term. Interest is pald 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 (7) the January 1, Year 1, bond issue and (2) the Docember 31, Year 1, recognition of interest expense, including the amortization of the discount and the cash payment, affect the companys financial statemints Note: Use + for increase or - for decrease. In the Statement of Cash Flows column, use the initiols OA to designate operating activity. IA for investing activity, and FA for financing activity. Not all cells require input. b. Determine the carrying value fface value less discount or plus premium) of the bond llabilty 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 (foce 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
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