Cleopatra Ltd offers $400 million of debentures, which is payable on application. The Interest rate on debentures is 8.5% per annum, payable annually. By 15 March 2020, application is received for $450 million debenture. The debentures are allotted on 1 May 2020, which coincides with Cleopatra Ltd’s financial year-end. Additional debenture application money is returned on 1 June 2020. Required: Prepare the journal entries to record the issue of the debenture on 1 May 2020 and annual interest payments on 30 April 2021 and 30 April 2022

Cleopatra Ltd offers $400 million of debentures, which is payable on application. The Interest rate on debentures is 8.5% per annum, payable annually. By 15 March 2020, application is received for $450 million debenture. The debentures are allotted on 1 May 2020, which coincides with Cleopatra Ltd’s financial year-end. Additional debenture application money is returned on 1 June 2020. Required: Prepare the journal entries to record the issue of the debenture on 1 May 2020 and annual interest payments on 30 April 2021 and 30 April 2022

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter9: Accounting For Receivables

Section: Chapter Questions

Problem 24Q: Chemical Enterprises issues a note in the amount of $156,000 to a customer on January 1, 2018. Terms...

See similar textbooks

Similar questions

Cleopatra Ltd offers $400 million of debentures, which is payable on application. The Interest rate on debentures is 8.5% per annum, payable annually. By 15 March 2020, application is received for $450 million debenture. The debentures are allotted on 1May2020, which coincides with Cleopatra Ltd’s financial year-end. Additional debenture application money is returned on 1June2020. Required: Prepare the journal entries to record the issue of the debenture on 1 May2020and annual interest payments on 30April2021 and 30 April 2022.
On 1 August 2020, Candy Ltd issued a disclosure document inviting applications for 10,000 of $80 debentures at par, payable in full on application. The debentures carry an 8% annual interest charge and will be redeemed at nominal value in 5 years. The interest payment is made semi-annually on 31 December and 30 June each year. By 30 September 2020, Candy Ltd received application money for 11,000 debentures. On 1 October 2020, Courtney Ltd issued 10,000 debentures and refunded monies to 1,000 unsuccessful applicants. Required: Prepare a general journal template as per the example below based on the information above, for Candy Ltd for the year ended 30 June 2021. Include a narration.
To finance the purchase of the machine by issuing $6 million, six-year, zero interest-bearing note to the seller on 1 July 2019. The expected interest rate for the note is 5.5%. The company is expected to pay off the note in six $1 million instalments, at every financial year end. The company employs effective interest method. Assume financial year ends December. Calculate the instalment and interest.
Pina Universe charges an initial franchise fee of $ 234,000. Upon the signing of the agreement, a payment of $ 26,000 is due. Thereafter, 5 annual payments of $ 41,600 are required. The credit rating of the franchisee is such that it would have to pay interest at 9% to borrow money. The franchise agreement is signed on August 1, 2020, and the franchise commences operation on October 1, 2020. Prepare the journal entries in 2020 for the franchisor under the following assumptions. a. No future services are required by the franchisee once the franchise starts operations. b. The franchisor has substantial services to perform, once the franchise begins operations, to maintain the value of the franchise. c. The total franchise fee includes training services (with a value of $ 6,900) for the period leading up to the franchise opening and for 2 months following opening
On January 1, 2020, Empress Bank granted a loan to a borrower. The interest rate on the loan is 10% payable annually on December 31, 2020. The loan matures in three years on December 31, 2022. Principal amount 5,000,000 Direct origination cost incurred 457,500 Origination fee received from the borrower 200,000 After considering the origination fee charged against the borrower and the direct origination cost incurred, the effective rate on the loan is 8%. Prepare the journal entries for 2020, 2021, and 2022.
On 1 January 2019, Janice Ltd issued $10,000,000 6%, 5-year debentures. Interest is payable half-yearly on 30 June and 31 December. The company’s financial year ends on 31 December. Any premiums or discounts on the issue are to be amortized over the entire term using the effective interest method. The market interest rate is 4% per annum. (a) Determine the price of debentures on 1 January 2019. (b) Prepare journal entries to record the debenture issued, the payments of interest, amortization of discount or premium for the financial year ending 31 December 2019. Narratives are not required.
Jernigan Co. receives $240,000 when it issues a $240,000, 6%, mortgage note payable to finance the construction of a building at December 31, 2020. The terms provide for annual installment payments of $33,264 on December 31. Instruction: Prepare the journal entries to record the the first and second installment payments.
On June 30, 2020, Amoro Company takes out a $5,000 loan documented through a note payable. Interest will be 16% annually and the note matures on June 30, 2021. The interest to be accrued at December 31, 2020 will be: о $400 0 $800 0 $0 0 $467
On January 1, 2020, Empress Bank granted a loan to a borrower. The interest on the loan is 10% payable annually starting on December 31, 2020. The loan matures in three years on December 31, 2022. Principal amount 5,000,000 Direct origination cost incurred 457,500 Origination fee charged against the borrower 200,000 After considering the origination fee charged against the borrower and the direct origination cost incurred, the effective rate on the loan is 8%. Determine the carrying amount of the loan on January 1, 2020. Prepare a table of amortization of the direct origination cost. Prepare journal entries for 2020, 2021, and 2022
Mermaid Bank granted a loan to a borrower on January 1, 2020. The interest on the loan is 12% payable annually starting December 31, 2020. the loan matures in three years on December 31, 2022. Principal amount 4,000,000 Direct origination cost incurred 80,000 Indirect origination cost incurred 40,000 Origination fee received from the borrower 310,000 a. Compute for the carrying amount of the loan receivable on January 1, 2020. b. Interest income for 2020 c. Carrying amount of the loan receivable on December 31, 2020.
At January 1, 2021, Brant Cargo acquired equipment by issuing a five-year, $150,000 (payable at maturity), 4% note. The market rate of interest for notes of similar risk is 10%.Required:1. Prepare the journal entry for Brant Cargo to record the purchase of the equipment.2. Prepare the journal entry for Brant Cargo to record the interest at December 31, 2021.3. Prepare the journal entry for Brant Cargo to record the interest at December 31, 2022.
To finance the purchase of the machine by issuing RM6 million, six-year, zero interest-bearing note to the seller on 1 July 2019. The expected interest rate for the note is 5.5%. The company is expected to pay off the note in six RM1 million instalments, at every financial year end. The company employs effective interest method. Calculate the yearly instalment and interest. Assume financial year ends December.