Part B (18 marks) BBA Limited (BBA) commenced its first year of operations in 2021. On 1 January 2021, BBA issued a $100,000, 5%, 3-year bond. The bond pays interest annually on 31 December of each year, starting from 31 December 2021. The bond has a yield of 6% and is accounted for under the effective-interest method. Present value of Present value of a single sum of 1 an ordinary annuity of 1 n = 3; i = 5% : 0.86384 2.72325 n = 3; i = 6% : 0.83962 2.67301 Tax deduction for interest expenses is allowed in the same year and of the same amount as it is recognized for financial reporting purpose.

Requirement:

B.1 Calculate the issue price on 1 January 2021. (3 marks)

B.2 Prepare the amortization table for the bond for 2021 to 2023. (12 marks)

B.3 Analyze whether the interest expense arising from the bond will create a deferred tax asset, a deferred tax liability, or neither for 2021. (3 marks)