Hillside issues $4,000,000, 6%, 15-year bonds dated January 1, 2023. The bonds pay interest semi-annually on June 30 and December 31. The bonds were issued at $3,456,400. Record the journal entry to issue the bonds on January 1, 2023. a. Record the journal entry to pay the semi-annual interest payment and amortize the discount on June 30, 2023. Record the journal entry to pay the semi-annual interest payment and amortize the discount on Dec. 31, 2023. On March 31, 2029, Hillside calls the bonds at 101. Record the journal entry to call the bonds. What is the total interest expense for the bonds for: One full year? The entire 15-year life of the bond? (if the bond had been held until maturity)
Debenture Valuation
A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.
Note Valuation
It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:
Problem #1
Hillside issues $4,000,000, 6%, 15-year bonds dated January 1, 2023. The bonds pay interest semi-annually on June 30 and December 31. The bonds were issued at $3,456,400.
- Record the
journal entry to issue the bonds on January 1, 2023. - a. Record the journal entry to pay the semi-annual interest payment and amortize the discount on June 30, 2023.
- Record the journal entry to pay the semi-annual interest payment and amortize the discount on Dec. 31, 2023.
- On March 31, 2029, Hillside calls the bonds at 101. Record the journal entry to call the bonds.
- What is the total interest expense for the bonds for:
- One full year?
- The entire 15-year life of the bond? (if the bond had been held until maturity)
- What is the carrying
value of the bonds on: - December 31, 2023?
- December 31, 2024?
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