Check my work 5 When companies offer new debt security issues, they publicize th
ID: 2530218 • Letter: C
Question
Check my work 5 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 2018 Now Securities Issues 2 points Corporate National Equipment Transfer Corporation-$201 million bonds via lead managers Second Tennessee Bank N.A. and Morgan, Dunavant & Co., according to a syndicate official . Terms: maturity, Dec. 15, 2024; coupon 7.47%; issue price, par; yield, 7.47%; noncallable, debt ratings: Ba-1 (Moody's Investors Service, Inc., BBB + (Standard&Poor; s) Skipped eBook IgWig Inc. -$351 million of notes via lead manager Stanley Brothers, Inc., according to a syndicate official. Terms: maturity, Dec. 1, 2026; coupon, 6.22%; Issue price, 99; yield, 6.32%; call date, NC; debt ratings : Baa-1 (Moody's Investors Service, Inc.), A (Standard & Poor's). Print References 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. Complete this question by entering your answers in the tabs below Required1Required 2Explanation / Answer
Date
Account Titles and Explanation
Debit
Credit
1
Cash
$201,000,000
Bonds Payable
$201,000,000
(To record issue of bonds at par)
2
Cash
$347,490,000
Discount on Notes Payable
$3,510,000
Notes Payable
$351,000,000
(To record issue of Notes Payable at discount; 351,000,000 x $99/$100 = $347,490,000; discount = 351,000,000 - 347,490,000 = $3,510,000)
The first entry represents sale of National Equipment Transfer Corporation issue to underwriters.
The second entry represents sale of IgWig Inc issue to underwriters.
Date
Account Titles and Explanation
Debit
Credit
1
Interest Expense
$7,507,350
Cash
$7,507,350
(To record semiannual interest payment for National Equipment Transfer Corporation)
1
Interest Expense
$10,980,684
Discount on Notes Payable
$64,584
Cash
$10,916,100
(To record interest expense, discount amortization and interest payment by IgWig Inc)
$201,000,000 x 7.47% x 6/12 = $7,507,350
Semiannual Interest payment = $351,000,000 x 6.22% x 6/12 = $10,916,100
Semiannual interest Expense = $347,490,000 x 6.32% x 6/12 = $10,980,684
Discount on notes payable (amortization of discount) = $10,980,684 - $10,916,100 = $64,584
Date
Account Titles and Explanation
Debit
Credit
1
Cash
$201,000,000
Bonds Payable
$201,000,000
(To record issue of bonds at par)
2
Cash
$347,490,000
Discount on Notes Payable
$3,510,000
Notes Payable
$351,000,000
(To record issue of Notes Payable at discount; 351,000,000 x $99/$100 = $347,490,000; discount = 351,000,000 - 347,490,000 = $3,510,000)