Exercise $10-17$A $($Static$)$ Straight$-$line amortization of a bond premium LO $10-5$

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.