On January 1, Year 1, Mudpond Company issued bonds with a $400,000 face value, a stated rate of interest of 5%, and a 10-year term to maturity. The bonds sold for $432,444. Mudpond uses the effective interest method to amortize bond discounts and premiums. The market rate of interest on the date of issuance was 4%. Interest is paid annually on December 31.

REQUIRED:

1. Complete the amortization schedule below:

2. 	Cash Payment	Interest Expense	Amortization	Carrying Value
   1/1/Year 1
   12/31/Year 1
   12/31/Year 2

1. Prepare journal entries to record:
   1. Issuance of bonds on January 1, Year 1.
   2. Payment of interest on December 31, Year 1.
   3. Payment of interest on December 31, Year 2.

2. Show the impact of these events on the horizontal financial statement model