Prepare journal entries to record the issuance of (1) the 12% bonds and (2) the redemption of the 8% bonds.
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 14-04
On December 18, 2020, the company issued its 12%, 20-year debenture bonds in the principal amount of $4,020,000 at 101, and the proceeds were used to redeem the 8%, 25-year mortgage bonds on January 2, 2021. The indenture securing the new issue did not provide for any sinking fund or for redemption before maturity.
(a) Prepare
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