Claire Corporation is planning to issue bonds with a face value of $210,000 and
ID: 2510691 • Letter: C
Question
Claire Corporation is planning to issue bonds with a face value of $210,000 and a coupon rate of 10 percent. The bonds mature in two years and pay interest quarterly every March 31, June 30, September 30, and December 31. All of the bonds were sold on January 1 of this year. Claire uses the effective-interest amortization method and also uses a discount account. Assume an annual market rate of interest of 12 percent. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.) 8.value: 10.00 pointsRequired information
Required: 1. Provide the journal entry to record the issuance of the bonds. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your final answers to nearest whole dollar amount.) ReferenceseBook & Resources General JournalDifficulty:
Required information 2. Provide the journal entry to record the interest payment on March 31, June 30, September 30, and December 31 of this year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your final answers to nearest whole dollar amount.)
Required information 3. What bonds payable amount will Claire report on this year’s December 31 balance sheet? (Round your final answers to nearest whole dollar amount.)
Explanation / Answer
Issue price: Present value of interest Quarterly received for 2 years i.e. 8 payment at 2.5% 36853.43 ($ 5250 * Annuity factor for 8 period at 3% i.e. 7.0197) Present value of Maturity received at year-2 ($210000* 0.7894) 165774 ISSUE PRICE 202627 Journal Entry: a. Cash Account Dr. 202627 Discount on bonds payable (210000-202627) 7373 Bonds payable 210000 31-Mar Interest expense Dr. 6079 Cash Account 5250 Discount on Bonds payable (53486/10) 829 30-Jun Interest expense Dr. 6104 Cash Account 5250 Discount on Bonds payable (53486/10) 854 30-Sep Interest expense Dr. 6129 Cash Account 5250 Discount on Bonds payable (53486/10) 879 31-Dec Interest expense Dr. 6156 Cash Account 5250 Discount on Bonds payable (53486/10) 906 Amortization table: Date cash Interest Interest exp Discount Amortizd Unamortized Discount Carrying value 31.03. 5250 6079 829 6544 203456 30.06 5250 6104 854 5690 204310 30.09 5250 6129 879 4811 205189 31.12 5250 6156 906 3905 206095 Balance Sheet: Bonds payable 210,000 Less: Disccount on bonds payable 3905 Net balance in bonds payable 206,095