Reference no: EM133137427
Question - ABC Corporation issued 4.30% notes on June 30, 2019. The debentures have the following specifications:
Principal amount US $500 million
Maturity date June 30, 2049
Issue price 99.048% of principal amount
Coupon rate 4.30%
Effective interest rate 4.357%
Interest payment dates June 30 and December 31
Initial interest payment date December 31, 2019
In reality, the notes were issued on May 22, 2019, they mature on June 15, 2049, and interest payment dates are June 15 and December 15. These dates were changed slightly to simplify the computation of interest accrual.
Required -
1. Prepare a journal entry to record the sale of these debentures on June 30, 2019. Use a discount account.
2. Prepare a journal entry to record the payment of interest and amortization of the discount on December 31, 2019. The company uses the effective-interest method of amortization with a discount account.
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