1. United Alliance Inc. needs funds to acquire new equipment and the company decided to raise the funds through issuing bonds or shares. After considering current market situation and company financial position, United Alliance considers On June 30, 2017, the market interest rate is 7%. United Alliance issued $1,000,000 of 8%, 20-year bonds at 110.625. The bonds pay semi-annual interest on June 30 and December 31. United Alliance Inc. amortizes bonds by the effective-interest method.

a. Explain the difference between long term liability and equity financing. (10 marks

Record issuance of the bonds on June 30, 2017, the payment of interest at December 31, 2017, and the semi-annual interest payment on June 30, 2018. (20 Marks)