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Calculate the issue price of the debentures

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Reference no: EM132709595

Question - As at 30 June 2019 Lama Ltd has total assets of $2.5 million and total liabilities of $1.6 million. On the same date, Lama issues $800 000 in preference shares. These shares are redeemable in two years' time at the option of the shareholder and offer a dividend rate of 8 per cent annum (or 4 per cent each six months) on such debentures. They do not include voting rights.

Required - Calculate the issue price (fair value) of the debentures and provide the accounting journal entries for 30 June 2019, 31 December 2019 and 30 June 2020.

Reference no: EM132709595

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