Straight-line amortization of a bond discountHale Co. was formed when it acquired cash fro...

Straight-line amortization of a bond discount

Hale Co. was formed when it acquired cash from the issue of common stock. The company then issued bonds at a discount on January 1, 2012. Interest is payable on December 31 with the first payment made December 31, 2012. On January 2, 2012, Hale Co. purchased a piece of land that produced rent revenue annually. The rent is collected on December 31 of each year, beginning December 31, 2012. At the end of the six-year period (January 1, 2018), the land was sold at a gain, and the bonds were paid off at face value. A summary of the transactions for each year follows:

2012

1.Acquired cash from the issue of common stock.

2.Issued six-year bonds.

3.Purchased land.

4. Received land rental income.

5.Recognized interest expense, including the amortization of the discount, and made the cash payment for interest on December 31.

2013-2017

6.Received land rental income.

7.Recognized interest expense, including the amortization of the discount, and made the cash payment for interest December 31.

2018

8.Sold the land at a gain.

9.Retired the bonds at face value.

Required

Identify each of these 9 transactions as asset source (AS), asset use (AU), asset exchange (AE), or claims exchange (CE). Explain how each event affects assets, liabilities, equity, net income, and cash flow by placing a + for increase, — for decrease, or NA for not affected under each of the categories. In the Cash Flow column, indicate whether the item is an oper­ating activity (OA), investing activity (IA), or financing activity (FA). The first event is re­corded as an example.