On January 1, 2016, Reese Incorporated issued bonds with a face value of $120,000, a stated rate of interest of 8 percent, and a five-year term to maturity. Interest is payable in cash on December 31 of each year. The effective rate of interest was 7 percent at the time the bonds were issued. The bonds sold for $124,920. Pitre used the effective interest rate method to amortize the bond discount.
a. Prepare an amortization table as shown below:
b. What item(s) in the table would appear on the 2018 balance sheet?
c. What item(s) in the table would appear on the 2018 income statement?
d. What item(s) in the table would appear on the 2018 statement of cash flows?