Lummins is a multinational corporation that designs, manufactures, and distributes engines, filtration, and power generation products. A summary of long-term debt per the Company’s 2020 and 2019 Financial Statements is included .

Using the information provided, answer the following questions:

NOTE: Assume interest payments are made semi-annually

1. Refer to the 3.65% notes due 2023 (1st instrument on the table). Calculate the interest expense on this note for fiscal 2020 (year ended 31 December 2020).

2. Refer to the 3.65% notes due 2023 (1st instrument on the table). Calculate the coupon payment on this note for fiscal 2020 (year ended 31 December 2020).

3. Refer to the same note as in part (a). Provide the entry that the Company will record at maturity.

CUMMINS INC.

NOTES TO FINANCIAL STATEMENTS

NOTE 11. DEBT (adapted from the 2020 and 2019 Financial Statements)

Long-term Debt

				Dec 31,
In millions	Interest Rate	2020		2019		2018
Long-term debt:
Senior notes, due 2023	3.65%	$ 500		$ 500		$ 500
Senior notes, due 2025	0.75%	500		---		---
Debentures, due 2027	6.75%	58		58		58
Debentures, due 2028	7.125%	250		250		250
Senior notes, due 2030	1.50%	850		---		---
Senior notes, due 2043	4.875%	500		500		500
Senior notes, due 2050	2.60%	650		---		---
Debentures, due 2098	5.65%	165		165		165
Other debt		132		59		64
Deferred issuance costs		(72)		(50)		(52)
Fair value adjustments		48		35		25
Finance leases		91		90		132
Total long-term debt		3,672 62		1,607 31		1,642 45
Less: Current maturities of long-term debt
Long-term debt		$ 3,610		$1,576		$1,597

Answer rating: 100% (QA)

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