Reference no: EM133175163

Question 1 - Corporation issued $650,000 of 6%, 10-year bonds payable on January 1, 2019.

The market interest rate at the date of issuance was 4%, and the bonds pay interest semiannually (on June 30 and December 31). Clarke Corporation's year-end is June 30.

Required -

1. Using the PV function in Excel, calculate the issue price of the bonds.

2. Make the effective-interest amortization table for the bonds through the first three interest payments.

3. Record Clarke Corporation's issuance of the bonds on January 1, 2019, and payment of the first semi-annual interest amount and amortization of the bond premium on June 30, 2019.

Question 2 - Company borrowed money by issuing $6,000,000 of 7% bonds payable at 101.9 on July 1, 2018.

Required -

1. How much cash did Kelvin receive when it issued the bonds payable? Journalize this transaction.

2. How much must Kelvin pay back at maturity? When is the maturity date?

3. How much cash interest will Kelvin pay each six months?

4. How much interest expense will Kelvin report each six months? Use the straight-line amortization method. Journalize the entries for the accrual of interest and the amortization of premium on December 31, 2018, and payment of interest on January 1, 2019.

The bonds are five-year bonds and pay interest each January 1 and July 1.