The Square Foot Grill, Inc. issued $200,000 of 10-year, 6 percent bonds on January 1, 2018, at

Question:

The Square Foot Grill, Inc. issued $200,000 of 10-year, 6 percent bonds on January 1, 2018, at 102. Interest is payable in cash annually on December 31. The straight-line method is used for amortization.

Required

a. Use a financial statements model like the one shown below to demonstrate how (1) the January 1, 2018, bond issue and (2) the December 31, 2018, recognition of interest expense, including the amortization of the premium and the cash payment, affects the company's financial statements. Use + for increase, âˆ’ for decrease, and NA for not affected.

The Square Foot Grill, Inc. issued $200,000 of 10-year, 6

b. Determine the carrying value (face value less discount or plus premium) of the bond liability as of December 31, 2018.
c. Determine the amount of interest expense reported on the 2018 income statement.
d. Determine the carrying value of the bond liability as of December 31, 2019.
e. Determine the amount of interest expense reported on the 2019 income statement.

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...