Yale Corporation issued a 6%, $96,000 5-year bond dated January 1, with interest payable annually on December 31. The bond was sold to yield 8% interest. Assume that the company uses the effective interest method to amortize bond discounts or premiums.

a. Provide journal entries to be made on January 1 and December 31 of this first year.

b. Indicate the impact of this transaction on the operating, investing, and financing sections of the current year statement of cash flows. The indirect method is used to report cash flows from operating activities.