The notes to the Friendship Ltd. financial statements reported the following data on December 31, Year 1 (end of the fiscal year):

Friendship Ltd. amortizes bond discount by the effective-interest method and pays all interest amounts at December 31.
Requirements
1. Assume the market interest rate on January 1 of year 1, the date of issuance of the bonds, is 6%. Answer the following questions about Friendship Ltd.'s long-term liabilities:
a. Using the PV function in Excel, what is the issue price of the bonds?
b. What is the maturity value of the 3% bonds?
c. What is Friendship Ltd.'s annual cash interest payment on the 3% bonds?
d. What is the carrying amount of the 3% bonds at December 31, Year 1?
2. Using Exhibit 9-4 as a model, prepare an amortization table through the maturity date for the 3% bonds. (Round all amounts to the nearest dollar.) How much is Friendship Ltd.'s interest expense on the 3% bonds for the year ended December 31, Year 4?
3. Show how Friendship Ltd. would report the 3% bonds and the 7% notes payable at December 31, Year 4.

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Note 6. Indebtedness $3,000,000 Bonds payable, 3% due December 31, Year 8 Less: Discount. Notes payable, 7%, payable in $50,000 annual installments starting in Year 5............ 300,000