Question

Carr Corporation issued $54,000 of 6 percent, 11-year bonds on January 1, Year 1, for a price that reflected a 7 percent market rate of interest. Interest is payable annually on December 31.

To determine the appropriate discount factor(s) using tables, click here to view Tables I, II, III, or IV in the appendix. Alternatively, if you calculate the discount factor(s) using a formula, round to six (6) decimal places before using the factor in the problem.

Required
a. What was the selling price of the bonds? (Round your intermediate calculations and final answer to the nearest dollar amount.)

b. Prepare the journal entry to record issuing the bonds. (Round your intermediate calculations and final answers to the nearest dollar amount. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

c. Prepare the journal entry for the first interest payment on December 31, Year 1, using the effective interest rate method. (Round your intermediate calculations and final answers to 2 decimal places. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1