Problem $2(12$ Marks$)$

On June $1,2023,$ Santa Ana Corp. sold $10-$year, $$500,000($face value$)$ bonds for

$$438,554.$ The bonds have a stated interest rate of $8\%$ and a yield of $10\%$ and

pay interest annually on May $31$ of each year. The bonds are to be accounted for

using the effective$-$interest method.

Instructions

a$)$ Construct a bond amortization table for this bond to indicate the amount of

interest expense and discount amortization at each May $31.$ Include only the

first four years. Make sure all columns and rows are properly labelled, and

round to the nearest dollar.

b$)$ The sales price of $$438,554$ was determined from present value tables.

Explain how one would determine the price using present value tables, or by

using a calculator.

c$)$ Assuming that interest and discount amortization are recorded each May $31,$

prepare the adjusting entry at December $31,2025($fiscal year end$).$ Round

values to the nearest dollar.