The company bought debentures with a face value of $1 45 ,000 and paid $1...
90.2K
Verified Solution
Link Copied!
Question
Accounting
The company bought debentures with a face value of $1 45 ,000 and paid $1 2 5 ,000 to the issuer plus a purchase commission of $2 ,000 . The debentures have a life of 4 years and will pay a coupon of 6.53 % per year at the end of each year. These instruments have been classified as subsequently measured at fair value th rough profit and loss . By the end of the 4 th year, Australian interest rates have moved to 1 2 %. The fair value amounts for this debenture at the end of each year are : Year Fair Value 1 $133,000 2 $147,000 3 $123,000 4 $ 154,469 Required : a. Calculate the effective rate of return (the market rate of interest) for these debentures . ( 3 marks ) b. Prepare a table which shows the movements relating to these debentures over their life . Please remember, these debentures are not held at amortized cost. ( 5 marks ) c. Prepare journal entries for all transactions relating to these debentures . ( 12 marks )
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Zin AI - Your personal assistant for all your inquiries!
