Question

When companies offer new debt security issues, they publicize the offerings in the financial press and on Internet sites. Assume the following were among the debt offerings reported in December 2021:

New Securities Issues

Corporate

National Equipment Transfer Corporation—$219 million bonds via lead managers Second Tennessee Bank N.A. and Morgan, Dunavant & Co., according to a syndicate official. Terms: maturity, Dec. 15, 2030; coupon 7.65%; issue price, par; yield, 7.65%; noncallable; debt ratings: Ba-1 (Moody's Investors Service, Inc.), BBB+ (Standard & Poor's).

IgWig Inc.—$369 million of notes via lead manager Stanley Brothers, Inc., according to a syndicate official. Terms: maturity, Dec. 1, 2032; coupon, 6.4%; Issue price, 99; yield, 6.5%; call date, NC; debt ratings: Baa-1 (Moody's Investors Service, Inc.), A (Standard & Poor's).

Required:
1. Prepare the appropriate journal entries to record the sale of both issues to underwriters. Ignore share issue costs and assume no accrued interest.
2. Prepare the appropriate journal entries to record the first semiannual interest payment for both issues.

Answer 1

Answer- LE Debitcs) credites) 219,00000 Particulary Cash To Bonds payable (Being to record the issue of 7.46%. bonds at face valve) Alc Dr 219,000,000 Gash (36amillinx99% AlC Discount on bonds payable pr $365,310,000 3,690,000 (364,000,000 - 365,310,00 payable (eeing to recoid the issue of bonds at discourrt) To Bonds $369,009000 2) Jnterest Espense (219.000,000XT.65/. ) Alc Dr 8,376, 150 8,376,750 To Cash | CBeing to recid payment of semi-annual interest) Interest Expens. Alc Dr (365,310, 000X 6.5%.X) To Discount on otes payablé Il, 872,575 64,575 Clli872is75il,000) To cash (ser.0,000xG.4/%, X) (Beêng to recid the payment of semi- 11,808,000 annual interest,