Question

When companies offer new debt security issues, they publicize the offerings in the financial press and on Internet sites. Assume the following were among the debt offerings reported in December 2021: New Securities Issues Corporate National Equipment Transfer Corporation-$207 million bonds via lead managers Second Tennessee Bank N.A. and Morgan, Dunavant & Co., according to a syndicate official. Terms: maturity, Dec. 15, 2030; coupon 7.53%; issue price, par; yield, 7.53%; noncallable; debt ratings: Ba-1 (Moody's Investors Service, Inc.), BBB+ (Standard & Poor's). IgWig Inc.-$357 million of notes via lead manager Stanley Brothers, Inc., according to a syndicate official. Terms: maturity, Dec. 1, 2032; coupon, 6.28%, Issue price, 99; yield, 6.38%; call date, NC; debt ratings: Baa-1 (Moody's Investors Service, Inc.), A (Standard & Poor's). Required: 1. Prepare the appropriate journal entries to record the sale of both issues to underwriters. Ignore share issue costs and assume no accrued interest. 2. Prepare the appropriate journal entries to record the first semiannual interest payment for both issues. Complete this question by entering your answers in the tabs below.

Answer 1

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1)

Event	General journal	Debit	Credit
1	Cash	207000000
	Bonds payable		207000000
	(To record the sale of nation equipment transfer corporation to underwriters)
2	Cash (357000000*99%)	353430000
	Discounts on notes payable (357000000-353430000	3570000
	Notes payable		357000000
	(To record the sale of IgWic Inc to underwriters)

2)

Event	General journal	Debit	Credit
1	Interest expense (207000000*7.53%/6/12)	7793550
	Cash		7793550
	(To record the first semiannual payment for national equipment transfer corporation)
2	Interest expense (353430000*6.38%/6/12)	11274417
	Discounts on notes payable (11274417-11209800)		64617
	Cash (357000000*6.28%/6/12)		11209800
	(To record the first semiannual payment for IgWig, Inc)