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 discount and the cash payn financial statements. Record the recognition of interest expense as transaction $2$a and amortization of the discount and the cash payment as transaction $2$ b $.$

Note: Select Increase, Decrease, or Increase and decrease to indicate how the event affects each element of the financial statements. In the Statement of Cash Flows column, indicate whether the item is an operating ad $($IA$),$ or financing activity $($FA$).$ Leave cells blank if no input is needed. Complete this question by entering your answers in the tabs below.

Req $\backslash ($ B $\backslash )$ to $\backslash ($ E $\backslash )$

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

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