On January 1, 2014, Clearwater Corporation sold a $753,000, 5 percent bond issue
ID: 2499745 • Letter: O
Question
On January 1, 2014, Clearwater Corporation sold a $753,000, 5 percent bond issue (6 percent market rate). The bonds were dated January 1, 2014, pay interest each December 31, and mature in 7 years. (FV of $1,PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.)
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.)
Prepare the journal entry to record the interest payment on December 31, 2014. Use straight-line amortization. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Show how the interest expense and the bonds payable should be reported on the December 31, 2014, annual financial statements. (Amounts to be deducted should be indicated by a minus sign.)
On January 1, 2014, Clearwater Corporation sold a $753,000, 5 percent bond issue (6 percent market rate). The bonds were dated January 1, 2014, pay interest each December 31, and mature in 7 years. (FV of $1,PV of $1, FVA of $1, and PVA of $1) (Use the appropriate factor(s) from the tables provided.)
Explanation / Answer
1 . Journal entry to record the issuance of the bonds:
Cash Account Dr $ 753,00
To Bonds payable Account $ 753,000
2. Prepare the journal entry to record the interest payment on December 31, 2014. Use straight-line amortization:
Interest Payable Account Dr $ 26355
To Cash Account $ 26355
3. Interest expense and bond payable on December 31st 2014:
Cash Account Dr $ 726,645
Interest Payable Account Dr $ 26355
To Bond Payable Account 753,000
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