Tanzanite Corporation issued $500,000 of 7% debentures to yield 11%, receiving $424,624. Interest is payable semiannually, and
Question:
Tanzanite Corporation issued $500,000 of 7% debentures to yield 11%, receiving $424,624. Interest is payable semiannually, and the bonds mature in five years.
1. What entries would be made by Tanzanite for the first two interest payments, assuming premium or discount amortization on interest dates by
(a) The straight-line method and
(b) The effective-interest method?
2. What entries would be made on the books of the investor for the first two interest receipts, assuming premium or discount amortization on interest dates and that one party obtained all the bonds and used the straight-line method of amortization?
3. If the sale is made to yield 5%, $543,760 being received, what entries would be made by Tanzanite for the first two interest payments, assuming premium or discount amortization on interest dates by
(a) The straight-line method and
(b) The effective-interest method?
Debenture DefinitionDebentures are corporate loan instruments secured against the promise by the issuer to pay interest and principal. The holder of the debenture is promised to be paid a periodic interest and principal at the term. Companies who... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Step by Step Answer:
Intermediate Accounting
ISBN: 978-0324592375
17th Edition
Authors: James D. Stice, Earl K. Stice, Fred Skousen