Reference no: EM132942800

Tofino Trading Limited (TTL), an IFRS reporting company with a December 31 year end, wants to raise capital on the bond market. TTL had the securities lawyers write up a debenture bond issue for 10 years at a face value of $12,000,000 and a coupon rate of 4%. The bond issue was dated and ready to take to market on September 1, 2018 with semi-annual interest payments (September 1 & March 1). The underwriters, monitoring the market interest rates, convinced TTL to wait and the bond was actually taken to market on November 1, 2018 for bond proceeds only of $13,015,269 (this is given; does not have to be proved), reflecting a yield rate of 3%. The Bank of Canada rate at the date of issue was 1.5%. TTL applies a separate bond discount or premium account, as required. (Hint: Apply a time line to plot the events, contemplate the entry descriptions and ensue accurate 'n' before proceeding with detailed calculations.) In presenting entries, round all calculations throughout this assignment to the nearest dollar (no cents).

Part I -

Required:

Problem a: Prepare entries, with supporting calculations, at the following dates:
1. Date of bond issue.
2. December 31, 2018, the financial year end. Hint: calculate the carrying value at March 1, 2019 and prorate the amortization from the date of issue to determine the interest expense for 2 months.
3. March 1, 2019

Part II

Problem b: On March 1, 2025, after the bond interest payment, TTL had excess cash and went to the open market and redeemed 25% of the bond issue when the market interest rate was 5%. Required Record the redemption entry (only); show supporting calculations.