Chrome File Edit View History Bookmarks People Window Help Chapter 10-Connect xM

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Chrome File Edit View History Bookmarks People Window Help Chapter 10-Connect xMarch Madness -XFINITY S x jack C O ezto.mheducation.com/hm.tpx value: 6.66 points On January 1 of this year, Clearwater Corporation sold bonds with a face value of $768,000 and a coupon rate of 8 percent. The bonds mature in 10 years and pay interest annually every December 31. Clearwater uses the straight- amortization method and also uses a discount account. Assume an annual market rate of interest of 9 percent. Yof S1 PM otSt, EVAof sde and PAot S)(Use the appropriate factors) 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) View transaction list Journal entry worsheet Record the issuance of the bonds. Note: Enter debits before credits Date General Journal Debilt Credit January 01 Record entry Clear entry View general journal 2

Explanation / Answer

issue price of bonds principal 768000 interest = 768000*8%= 61440 where i= 9% n= 10 years Calculation of bond issue price principal * PV of $1 = amount 768000 * 0.42241 = 324411 interest * PV of ordinary annuity= 61440 * 6.41766 = 394301 bond issue price 718712 Date General journal Debit Credit 1-Jan Cash 718712 Discount on bonds 49288 Bonds payable 768000 31-Dec interest expense 66369 discount on bonds 4929 cash 61440 Balance sheet Bonds payable 768000 less discount on bonds 44359 723641

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