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.)

Answer 1

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