Exercise $10-15$A $($Static$)$ Straight$-$line amortization of a bond premium LO $10-5$

The Square Foot Grill, Incorporated issued $$200,000$ of $10-$year, $6$ percent bonds on January $1,$ Year $2,$ at $102.$ Interest is payable in cash annually on December $31.$ The straight$-$line method is used for amortization.

Required

Use a financial statements model to demonstrate how $(1)$ the January $1,$ Year $2,$ bond issue and $(2)$ the December $31,$ Year $2,$ recognition of interest expense, including the amortization of the premium and the cash payment, affects the company$$s financial statements.

Determine the carrying value $($face value less discount or plus premium$)$ of the bond liability as of December $31,$ Year $2.$

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

Determine the carrying value of the bond liability as of December $31,$ Year $3.$

Determine the amount of interest expense reported on the Year $3$ income statement.