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How identify between ordinary shares and debentures

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Reference no: EM132629220

Question (a) Identify five differences between ordinary shares and debentures.

Question (b) On 1 July 2018 Maleka Ltd issues $6 million in six-year debentures that pay interest each six months at a coupon rate of 8 per cent. At the time of issuing the securities, the investors required rate of return was 6 per cent. Interest expense is determined using the effective-interest method.

REQUIRED

(i) Determine the issue price of the debenture

(ii) Will the debenture be issued at premium or discount? Why?

iii) Provide the journal entries at: 1 July 2018, 30 June 2019, & 30 June 2020.

Reference no: EM132629220

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