Determine the issue price of the debentures

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Question - On 1 July 2014, ABC Limited issued $10 million in five year debentures that pay interest each six months at an annual coupon rate of 10%. The debentures will mature on 30 June 2019, which is also the date of the final interest payment. At the time of the issue of the debentures, the market rate of return is 12%.

Required:

1. Determine the issue price of the debentures and calculate any premium or discount. Show workings. Note - you will need to use the Present Value tables. These are available in the textbook and on the unit's Blackboard site.

2. Provide journal entries in the accounts of ABC Limited on the following dates:

1 July 2014

30 June 2016

30 June 2019

Reference no: EM131942280

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