On May 1, 2024, Herron Corp. issued $600,000 of 9%, 5-year unsecured bonds at face value. The
Question:
On May 1, 2024, Herron Corp. issued $600,000 of 9%, 5-year unsecured bonds at face value. The bonds were dated May 1, 2024, and pay interest annually on May 1. Financial statements are prepared annually on December 31.
Instructions
a. Are these debenture bonds? Why or why not?
b. Prepare the journal entry to record the issuance of the bonds.
c. Prepare the adjusting entry to record the accrual of interest on December 31, 2024.
d. Show the balance sheet presentation at December 31, 2024.
e. Prepare the journal entry to record the payment of interest on May 1, 2025, assuming Herron does not use reversing entries.
f. Prepare the adjusting entry to record the accrual of interest on December 31, 2025.
As a source of long-term financing, what are the major advantages of issuing debt instead of issuing shares? What are the disadvantages?
Step by Step Answer:
a Because they are unsecured the bonds would be considered debenture bonds b ...View the full answer
Accounting Principles Volume 2
ISBN: 9781119786634
9th Canadian Edition
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Warren, Lori Novak
