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Claire Corporation is planning to issue bonds with a face value of $160,000 and a coupon rate of 8 percent
Claire Corporation is planning to issue bonds with a face value of $160,000 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 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.) View transaction list Journal entry worksheet
Expert Solution
1. Journal entry to record the Issue of bonds is:
| Date | Account Title and Explanation | Debit $ | Credit $ |
| Jan-01 | Cash | 148,767 | |
| Discount on Bonds Payable | 11,233 | ||
| Bonds Payable | 160,000 | ||
| (To record issuance of bonds at discount) |
Working:
Table values are based on:
n = 2 years*4 = 8
i = 12/4 = 3%
| Cash Flows | Amount | PV Factor | Present Value |
| Interest | 3,200 | 7.0197 | 22,463.04 |
| Principal | 160,000 | 0.7894 | 126,304 |
| Price | 148,767.04 |
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