Question

On January 1 of this year, Clearwater Corporation sold bonds with a face value of $761,000 and a coupon rate of 6 percent. The bonds mature in 10 years and pay interest annually every December 31. Clearwater uses the straight-line amortization method and also uses a discount account. Assume an annual market rate of interest of 7 percent. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided. Round your final answer to whole dollars.) Required: 1. Prepare 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.) 2. Prepare the journal entry to record the interest payment on December 31 of this year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) 3. How will the bonds be reported on Clearwater's December 31 Balance Sheet?

Answer #1

Issue price: | |||||||||

Present value of interest annual received for 10 years ( $ 45660* Annuity factor at 7% i.e. 7.0236) | 320697.6 | ||||||||

Present value of Maturity received at year-10 ($761000* 0.5083) | 386816.3 | ||||||||

ISSUE PRICE | 707514 | ||||||||

Journal Entry: | |||||||||

a. | Cash Account Dr. | 707514 | |||||||

Discount on bonds payable (761000-707514) | 53486 | ||||||||

Bonds payable | 761000 | ||||||||

b. | Interest expense Dr. | 51009 | |||||||

Cash Account | (761000*6%) | 45660 | |||||||

Discount on Bonds payable (53486/10) | 5349 | ||||||||

Balance Sheet: | |||||||||

Bonds payable | 761000 | ||||||||

Less: Disccount on bonds payable | (53486-5349) | 48137 | |||||||

Net balance in bonds payable | 712863 | ||||||||

On January 1 of this year, Clearwater Corporation sold bonds
with a face value of $751,000 and a coupon rate of 7 percent. The
bonds mature in 10 years and pay interest annually every December
31. Clearwater uses the straight-line amortization method and also
uses a discount account. Assume an annual market rate of interest
of 8 percent. (FV of $1, PV of $1, FVA of $1, and PVA of $1)
(Use the appropriate factor(s) from the tables provided.
Round...

Park Corporation is planning to issue bonds with a face value of
$2,400,000 and a coupon rate of 9 percent. The bonds mature in 10
years and pay interest semiannually every June 30 and December 31.
All of the bonds were sold on January 1 of this year. Park uses the
effective-interest amortization method and also uses a premium
account. Assume an annual market rate of interest of 7.5 percent.
(FV of $1, PV of $1, FVA of $1, and...

Park Corporation is planning to issue bonds with a face value of
$3,300,000 and a coupon rate of 9 percent. The bonds mature in 10
years and pay interest semiannually every June 30 and December 31.
All of the bonds were sold on January 1 of this year. Park uses the
effective-interest amortization method and also uses a premium
account. Assume an annual market rate of interest of 7.5 percent.
(FV of $1, PV of $1, FVA of $1, and...

Serotta Corporation is planning to issue bonds with a face value
of $470,000 and a coupon rate of 12 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. Serotta uses the effective-interest
amortization method and also uses a premium account. Assume an
annual market rate of interest of 8 percent. (FV of $1, PV of $1,...

Park Corporation is planning to issue bonds with a face value of
$750,000 and a coupon rate of 7.5 percent. The bonds mature in 4
years and pay interest semiannually every June 30 and December 31.
All of the bonds were sold on January 1 of this year. Park uses the
effective-interest amortization method and does not use a discount
account. Assume an annual market rate of interest of 8.5 percent.
(FV of $1, PV of $1, FVA of $1,...

Claire Corporation is planning to issue bonds with a face value
of $150,000 and a coupon rate of 8 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 does not use a discount account. Assume an annual market rate
of interest of 12 percent. (FV of $1, PV of...

On January 1, a corporation issued $210,000 in bonds at face
value. The bonds have a stated interest rate of 7 percent. The
bonds mature in 10 years and pay interest once per year on December
31.
Required:
1, 2 & 3. Prepare the required journal
entries to record the bond issuance, interest payment on December
31, early retirement of the bonds. Assume the bonds were retired
immediately after the first interest payment at a quoted price of
102. (If...

On January 1 of this year, Victor Corporation sold bonds with a
face value of $1,440,000 and a coupon rate of 10 percent. The bonds
mature in four years and pay interest semiannually every June 30
and December 31. Victor uses the straight-line amortization method
and does not use a premium account. Assume an annual market rate of
interest of 8.5 percent. (FV of $1, PV of $1, FVA of $1, and PVA of
$1) (Use the appropriate factor(s) from...

Universal Foods issued 10% bonds, dated January 1, with a face
amount of $172 million on January 1, 2021 to Wang Communications.
The bonds mature on December 31, 2035 (15 years). The market rate
of interest for similar issues was 12%. Interest is paid
semiannually on June 30 and December 31. (FV of $1, PV of $1, FVA
of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use
appropriate factor(s) from the tables provided.)
Required:
1. to...

On January 1, 2018, Darnell Window and Pane issued $19.1 million
of 10-year, zero-coupon bonds for $7,363,877 (FV of $1, PV of $1,
FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate
factor(s) from the tables provided.)
Required: 2. Determine the effective rate of interest.
Inerest rate......?
3. Prepare the necessary journal entries. (If no entry is
required for a transaction/event, select "No journal entry
required" in the first account field. Round your intermedaite...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 9 minutes ago

asked 9 minutes ago

asked 17 minutes ago

asked 23 minutes ago

asked 27 minutes ago

asked 47 minutes ago

asked 57 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago