Duncan Brooks needs to borrow $500,000 to open new stores. Brooks can borrow $500,000 by issuing 5%, 10-year bonds at 96. 1) How much will Brooks actually receive in cash under this arrangement? 2) How much must Brooks pay back at maturity? 3) How will Brooks account for the difference between the cash received on the issue date and the amount paid back? a. Brooks will account for the $20,000 difference (discount) between the $480,000 borrowed and the $500,000 paid back by amortizing the discount as interest expense over the 10 years that the bonds are outstanding. b. The difference will be shown as a loss on disposal and reduce the amount of net income in the year of maturity. c. Brooks will account for the $20,000 difference (premium) between the $480,000 borrowed and the $500,000 paid back by amortizing the discount as interest expense over the 10 years that the bonds are outstanding. d. The difference does not need to be accounted for according to the historical cost principle. 4) Based on Brooks' situation the market interest rate must be higher than the bond's stated rate of 5%. True - False 5) What would be the carrying value of Brooks bond at the end of the second year using straight-line amortization? 6) What is the present value of Brooks' bond if the current market interest rate is 7%?