Giant Company issued bonds on January 1, Year 1. Interest is paid annually to bond holders beginning December 31, Year 1. The company uses straight-line method for bond amortization.

Face value of the bond

$96,000

Stated rate of interest on the bond

7.00%

Bond maturity period

10

years

Bonds were issued at

99

Required:

a)

Determine the carrying value of the bond liability as of December 31, Year 1

b)

Determine the amount of interest expense reported in Year 1 income statement

c)

Determine the carrying value of the bond liability as of December 31, Year 2

d)

Determine the amount of interest expense reported in Year 2 income statement