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What entry would you record on issuance

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Reference no: EM132890687

Question - Crab Apple Limited (CAL), a publicly listed company took 5,000, 4-year bonds with the following terms to market:

Face value: $1,000

Coupon rate: 6%

Bond date: January 1, 2020

Interest payment dates: July 1 and January 1 (semi-annually)

The bonds were priced to yield 4%. CAL applies the effective interest rate method and has an October 31 year-end.

PART A - Make all of the necessary entries from January 1, 2020, through January 1, 2021.

PART B - The original bond issue facts remain the same (above) except that CAL wishes to attract more investors by attaching to each $1,000 denomination bond, the option to purchase 1 CAL common share after January 1, 2021, at a price of $100 per share.

Similar options were being traded at $15 per share on the open market. CAL's investment bankers determine that with these "equity sweeteners", the bond issue would raise $5,600,000.

What entry would you record on issuance?

Reference no: EM132890687

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