Stuart Company issued bonds with a face value of $$150,000$ on January $1,$ Year $1.$ The bonds had a stated interest rate of $6$ percent and a five$-$year term. Interest is paid in cash annually, beginning December $31,$ Year $1.$ The bonds were issued at $103.$ The straight$-$line method is used for amortization.

Required

a$.$ Use a financial statements model to demonstrate how $(1)$ the January $1,$ Year $1,$ bond issue and $(2)$ the December $31,$ Year $1,$ recognition of interest expense, including the amortization of the premium and the cash payment, affect the company's financial statements. Use $+$ for increase, $-$ for decrease, and leave blank for not affected.

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 of the bond liability as of December $31,$ Year $2.$

e$.$ Determine the amount of interest expense reported on the Year $2$ income statement.

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Use a financial statements model to demonstrate how $(1)$ the January $1,$ Year $1,$ bond issue and $(2)$ the December $31,$ Year $1,$ recognition of interest expense, including the amortization of the premium and the cash payment, affect the company's financial statements. Use $+$ for increase, $-$ for decrease, and leave blank not affected. $($In the Statement of Cash Flows column, use the initials OA to designate operating activity, IA for investing activity, FA for financing activity, and lea blank for not affected.$)$

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$\backslash$table$[[\backslash$table$[[$Event$],[$No$.]],$Effect of Transactions on Financial Statements,$\backslash$table$[[$Statement of Cash$],[$Flows$]]],[$Balance Sheet,Income Statement$],[$Assets$,=,$Liabilities,$+,\backslash$table$[[$Stockholders$\text{'}],[$Equity$]],$Revenue,$-,$Expenses,$=,$Net Income$],[1.,$grad,$=,,+,,.,-,,=,,],[2$a$.,,=,,+,,,-,,=,,],[2b.,,=,,+,,,-,,=,,]]$