Claire Corporation is planning to issue bonds with a face value of $130,000 and
ID: 2562464 • Letter: C
Question
Claire Corporation is planning to issue bonds with a face value of $130,000 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 $1) (Use the appropriate factor(s) from the tables provided.) Required: 1. Provide the journal entry to record the issuance of the bonds. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your final answers to nearest whole dollar amount.) 2. Provide the journal entry to record the interest payment on March 31, June 30, September 30, and December 31 of this year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your final answers to nearest whole dollar amount.)
Explanation / Answer
1. journal entry to record the issuance of the bonds.
2.journal entry to record the interest payment on March 31, June 30, September 30, and December 31 of this year.
Working:
sale value of bond
Amortization table
Year Particulars L.F Debit ($) Credit ($) Jan-01 Cash 125,436 Discount on Bonds payable 4,564 Bond Payable 130,000 (For 2 year bonds issued at discount)