. Keller Corporation offers to issue zero-coupon bonds of $80,000 on January 1, Year One. The bonds will come due on December 31, Year Three. Keller and several potential creditors negotiate an annual interest rate of 7 percent on the bonds. The present value of $1 in 3 periods at an annual interest rate of 7 percent is $0.81630. The present value of an ordinary annuity of $1 for 3 periods at an annual interest rate of 7 percent is $2.62432. The present value of an annuity due of $1 for 3 periods at an annual interest rate of 7 percent is $2.80802.

a. Determine the amount the creditors will pay on January 1, Year One, for these bonds.

b. Record the issuance of the bonds on January 1, Year One.

c. Make the necessary adjusting entry at the end of Year One. What is the liability balance at the end of Year One?

d. Make the necessary adjusting entry at the end of Year Two. What is the liability balance at the

end of Year Two?