Exercise 10-17A Straight-line amortization of a bond premium LO 10-5 Stuart Company issued bonds with a $150,000 face value on January 1 Year 1. The bonds had a 6 percent stated rate of interest and a five-year term. Interest is paid in cash annually, beginning December 31, Year 1. The bonds were issued at 103. 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 premium and the cash payment, affect the company's financial statements. Use + for increase, - for decrease, and NA for not affected. (In the Cash Flow column, use the initials OA to designate operating activity, IA for investing activity, FA for financing activity, and NA for not affected.) Effect of Transactions on Financial Statements Balance Sheet Income Statement Revenue - Expense - Net Income Statement of Cash Flow Event No. Assets - Liabilities. Stockholders' Equity 1. 2a. 2b. 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 of the bond liability as of December 31, Year 2. e. Determine the amount of interest expense reported on the Year 2 income statement. b. Carrying value c Interest expense d. Carrying value e. Interest expense