*Please complete parts E and F***** On May 1, 2022, Cucumber Corporation issued $860,000, 12%, 5-year bonds at face value. The bonds were dated May 1, 2022, and pay interest annually on May 1. Financial statements are prepared annually on December 31. Prepare the journal entry to record the issuance of the bonds. Date Account Titles and Explanation Debit
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:
*****Please complete parts E and F*****
On May 1, 2022, Cucumber Corporation issued $860,000, 12%, 5-year
- Prepare the
journal entry to record the issuance of the bonds.
|
Date |
Account Titles and Explanation |
Debit |
Credit |
|
May 1, ‘22 |
Cash |
860,000 |
|
|
|
Bonds Payable |
|
860,000 |
- Prepare the
adjusting entry to record the accrual of interest on 12/31/22
|
Date |
Account Titles and Explanation |
Debit |
Credit |
|
Dec. 31, ‘22 |
Interest Expense |
60200 |
|
|
|
Interest Payable |
|
60200 |
- Show the balance sheet presentation on Dec. 31, 2022.
|
Current Liabilities: |
|
|
Interest Payable |
68,800 |
|
Long-term Liabilities: |
|
|
Bonds Payable |
860,000 |
- Prepare the journal entry to record payment of interest on May 1, 2023.
|
Date |
Account Titles and Explanation |
Debit |
Credit |
|
May 1, ‘23 |
Interest Expense (103,200 – 68,800) |
34,400 |
|
|
|
Interest Payable |
68,800 |
|
|
|
Cash (860,000 * 12%) |
|
103,200 |
E) Prepare the adjusting entry to record the accrual of interest on 12/31/23.
|
Date |
Account Titles and Explanation |
Debit |
Credit |
|
Dec. 31, ‘23 |
|
|
|
|
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F) Assume that on January 1, 2024, Cucumber pays the accrual bond interest and calls the bonds. The call price is 101. Record the payment of interest and redemption of the bond.
|
Date |
Account Titles and Explanation |
Debit |
Credit |
|
Jan. 1, ‘24 |
|
|
|
|
|
|
|
|
|
|
(To record payment of interest) |
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Jan. 1, ‘24 |
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(To record redemption of the bonds) |
|
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