Question 8: A company issues a $100,000, 5-year bond with a stated interest rate of 8% payable annually. Provide a comprehensive explanation of the journal entries and subsequent adjustments to record the bond issuance, interest expense, and amortization of bond discount or premium.

Requirements:

1. Record the journal entry to recognize the issuance of the bond at face value.
2. Post the journal entry to the Bonds Payable account in the ledger.
3. Calculate the annual interest expense based on the stated interest rate and bond carrying value.
4. Record the journal entry to recognize interest expense and pay interest to bondholders.
5. Post the journal entry to the Interest Expense and Cash accounts in the ledger.
6. Determine whether the bond was issued at a discount or premium and calculate the bond carrying value.
7. Record the journal entry to amortize bond discount or premium over the bond's term.
8. Post the journal entry to the Amortization of Bond Discount or Premium account in the ledger.
9. Analyze how these transactions affect the company's balance sheet and income statement.
10. Discuss the impact of bond issuance on a company's debt-to-equity ratio and financial leverage.