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Determine the issue price

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Question - On 1 July 2014 Michaela Ltd issues $2 million in five-year debentures that pay interest each six months at a coupon rate of 20%. At the timing of issuing the securities, the market requires a rate of return of 16%. Interest is determined using the effective method.

(a) Determine the issue price

(b) Provide the journal entries at:

(i) 1 July 2014

(ii) 30 June 2015

(iii) 30 June 2016

Reference no: EM132626356

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