Return to question 3 Exercise 10-14A (Algo) Straight-line amortization of a bond discount LO 10-4 5 bits Dlaz Company issued bonds with a $117.000 face value on January 1, Year 1. The bonds had a 5 percent stated rate of interest and a 10 year term. Interest is paid in cash annually, beginning December 31, Year 1. The bonds were issued at 98. The straight line method is used for amortization. 2420 Required a. Use a financial statements model like the one shown next to demonstrate how (the January 1 Year 1 bond issue and (a) the December 31 Year 1. recognition of interest expense, including the amortization of the discount and the cash payment, affect the company's financial statements. (Use + for increase or for decrease. In the Statement of Cash Flows column, use the initials OA to designate operating activity, IA for investing activity, and FA for financing activity. Not all cells require input) Answer is complete but not entirely correct. Effect of Transactions on Financial statements Balance Sheet Income Statement Liabilities Stockholders Revenue Equity Expense statement of Cash Flow Net Income Assets Event No 1 - FA OA OO 2. o b. Determine the carrying value (face value less discount or plus premium) of the bond liability as of December 31, Year 1 c. Determine the amount of interest expense reported on the Year 1 income statement. d. Determine the carrying value (face value less discount or plus premium) of the bond Nobility as of December 31, Year 2 e. Determine the amount of interest expense reported on the Year 2 income statement. Answer is complete but not entirely correct. b. 0. Carrying value Interest expense Corrying value Interest expense $ 114,777 $ 5,967 $ 114,894 5,967 % d. e