On May 1, 2021, Herron Corp. issued $600,000 of 9%, 5-year unsecured bonds at face value. The
Question:
On May 1, 2021, Herron Corp. issued $600,000 of 9%, 5-year unsecured bonds at face value. The bonds were dated May 1, 2021, and pay interest annually on May 1. Financial statements are prepared annually on December 31.
Instructions
a. Is this a debenture bond? 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, 2021.
d. Show the balance sheet presentation at December 31, 2021.
e. Prepare the journal entry to record the payment of interest on May 1, 2022, assuming Herron does not use reversing entries.
f. Prepare the adjusting entry to record the accrual of interest on December 31, 2022.
Taking It Further
As a source of long-term financing, what are the major advantages of issuing debt instead of issuing shares? What are the disadvantages?
Financial StatementsFinancial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Step by Step Answer:
a Because it is unsecured the bond would be considered a debenture bond b 2021 May 1 Cash 600000 Bon...View the full answer
Accounting Principles Volume 2
ISBN: 978-1119502555
8th Canadian Edition
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Warren, Lori Novak
