Assume that on January 2, 2020, the Valenzuela Corporation issues P1,000,000, 5-year term bonds with a stated interest rate of 12%. The bonds pay interest every January 2 and July 1. The bonds were issued to yield 12%, which is another way of saying that they were issued at par, and thus the company received the full P1,000,000. The next interest payment is due on January 2, 2021. The corporation’s year-end is December 31, and the firm must make an adjusting entry to record interest expense for the six-month period, July 1 to December 31. Requirement(s): The journal entry to record this bond issue is.. The journal entry to record required annual interest payment of 6% This adjusting entry and the entry to record the subsequent payment are:
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:
Problem #1
Assume that on January 2, 2020, the Valenzuela Corporation issues P1,000,000, 5-year term bonds with a stated interest rate of 12%. The bonds pay interest every January 2 and July 1. The bonds were issued to yield 12%, which is another way of saying that they were issued at par, and thus the company received the full P1,000,000. The next interest payment is due on January 2, 2021. The corporation’s year-end is December 31, and the firm must make an
Requirement(s):
- The
journal entry to record this bond issue is.. - The journal entry to record required annual interest payment of 6%
- This adjusting entry and the entry to record the subsequent payment are:
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