Question AP10-9. Please show full steps

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lent of earnings Carrying amount on statement of financial position Case B: Sold at a discount (90) Cash inflow Cash outflow Interest expense on statement of earnings Carrying amount on statement of financial position Case C: Sold at a premium (110) Cash inflow Cash outflow Interest expense on statement of earnings Carrying amount on statement of financial position 2. For each separate case, calculate the following: a. Total cash outflow b. Total cash inflow c. Net cash outflow d. Total interest expense over the life of the bonds 3. a. Explain why the net cash outflows differ among the three cases. b. For each case, explain why the net cash outflow is the same as total interest exper LO10-S1 AP10-9 excel (Appendix 10A) Straight-Line versus Effective-Interest Methods of Amortizing Discount, with Discussion (P10-12) Canadian Products Corporation manufactures office equipment and supplies. The com authorized a bond issue on January 1, year 1, with the following terms: Maturity (par) value: $120,000,000 Interest: 7.9 percent per year payable each December 31 Interpreting Non-current Liabilities Maturity date: December 31, year 5 Effective-interest rate when sold: 8 percent 603 Required: 1. Compute the bond issue price. Explain why both the stated and effective interest rates are used in this computation. 2. Prepare the entry to record this bond issue without a bond discount or premium account 3. Assume that the company used the straight-line method to amortize the discount or premium on the bond issue. Compute the following amounts for each of the five years: a. Interest paid b. Amortization of bond discount or premium c. Bond interest expense d. Carrying amount of the bond e. Interest expense as a percentage of the carrying amount at the beginning of the year The straight-line method is theoretically deficient when interest expense is related to the carrying amount of the debt. Explain. 4. Assume instead that the company used the effective-interest method to amortize the discount or premium. Prepare an effective-interest bond amortization schedule similar to the one in the text. The effective interest method provides a constant interest rate when interest expense is related to the net liability. Explain by referring to the bond amortization schedule. 5. Which method should the company use to amortize the bond discount or premium? As a financial analyst, would you prefer one method over the other? If so, why? DIEM