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Moon Co$.$ sells food blenders. During $2023,$ Moon made $37,000$ blenders at an average cost of $$80.$ It sold out $25,000$ food blenders at an average price of $$130.$ Moon provides a $2-$year warranty for each blender sold and estimates that $9\%$ of blenders will be returned for warranty with an estimated cost of $$36$ each. By the end of $2023,$ Moon has spent $$44,000$ servicing the warranty repairs. All the above transactions have been settled in cash.

During $2023,$ Moon has $50$ employees who work $5-$day per week and get paid each other Friday. By December $22,2023,$ Moon has paid salaries of $$324,000$ and payroll tax expenses of $$37,000$ for the year.

Since the business grows quickly, Moon needs cash to expand. By the end of $2022,$ the Board of Directors authorized the management to issue $10-$year bonds with a par value of $$3,000,000,$ an annual contract interest rate of $8\%,$ and semi$-$annual interest payments. Moon chose to use the straight$-$line method to amortize discounts or premiums on its bonds.

$1.$ On January $1,2023,$ management issued the above$-$authorized $10-$year bonds with a par value of $$2,000,000.$ Interests on these bonds will be paid semiannually on June $30$ and December $31.$ On the issuance day, the annual market rate was $10\%$ and the bonds were sold for $86\mathrm{.}4112.$

$2.$ On June $30,$ Moon made the first interest payment for the $$2,000,000,8\%$ bonds.

$3.$ On July $1,$ Moon issued the rest of the above$-$authorized $10-$year bonds with a par value of $$1,000,000.$ Interests on these bonds will be paid semiannually on July $1$ and January $1.$ Since the annual market rate on the issuance date was $5\%,$ the bonds were sold for $122\mathrm{.}39.$

$4.$ On December $31,$ Moon made the second interest payment for the $$2,000,000,8\%$ bonds.

Requirements:

$1.$ ANALYZE the effects of the above transactions on the specific accounts in the Accounting Equation or RECORD the above transactions $($Choose either analysis or recording$).($Hint: a total of $10$ transactions regarding sales, inventory, warranty liabilities, payroll paid until December $22,$ and $4$ transactions related to bonds payable$).$

$2.$ Make any necessary adjustments for accrued bond interest expense and payroll$-$related liabilities on $12/31/2023.$ Specifically

a$.$ Moon should accrue interest on the $$1,000,000$ par value bonds because the interest would not be paid in cash until January $1,2024.$

b$.$ Moon has to adjust for the unpaid salaries for employees from December $23$ to December $31.$ The total of salaries for employees is $$29,500$ for this period and would be paid on January $5,2024.$ Withholdings from the employees' salaries include FICA Social Security taxes at the rate of $6\mathrm{.}2\%$ and FICA Medicare taxes at the rate of $1\mathrm{.}45\%$ for all employee earnings during this period; $$8,604$ of federal income taxes, and $$1,750$ of medical insurance deductions.

c$.$ Moon has to adjust for payroll$-$related taxes to state and federal governments. The state unemployment tax rate is $3\%$ with a total of $$885.$ The federal unemployment tax rate is $0\mathrm{.}8\%$ with a total of $$236.$

$3.$ Show the effects of all the above transactions on Moon$$s Balance Sheet as of $12/31/2023$ and Income Statement of $2023($Hint: the key is to understand how each financial statement will be affected by each account used in the above requirements $1$ and $2.$ Thus, there is no need to prepare the complete financial statements.$)$

$4.$ Please provide a brief explanation of how the market interest rate affects the accounting and reporting of Moon$$s bonds payable.

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