Damelin QUESTION 1 FINANCIAL INSTRUMENTS (40 Marks) Magoda Limited issued R100 000 debentures on 1 January 2010 at par. Interest at the rate of 12% p.a. is payable on 31 December each year. The debentures are to be redeemed at a premium of 26.262% on 31 December 2015. The premium was calculated so that the effective cost of the debentures after providing for the premium on redemption, would be 15% p.a. The amount that will be required for the premium on the redemption of the debentures is to be provided for over the life of the debentures using the effective rate of interest method. The debentures were not designated at fair value through profit and loss on initial recognition. The debentures are secured over the land and buildings of the company. The company's financial year end is 31 December. Required 1.1 Prepare an amortisation table showing the amount of premium that would be provided each (11) year over the life of the debenture. 1.2 Prepare all the journal entries relating to the debentures from the 2010 financial year to the end (18) of 2012, induding closing entries. 1.3 Show how matters relating to the debenture will be disclosed in the financial statements and (11) notes of Magoda Limited for the 2012 financial year end. Damelin QUESTION 1 FINANCIAL INSTRUMENTS (40 Marks) Magoda Limited issued R100 000 debentures on 1 January 2010 at par. Interest at the rate of 12% p.a. is payable on 31 December each year. The debentures are to be redeemed at a premium of 26.262% on 31 December 2015. The premium was calculated so that the effective cost of the debentures after providing for the premium on redemption, would be 15% p.a. The amount that will be required for the premium on the redemption of the debentures is to be provided for over the life of the debentures using the effective rate of interest method. The debentures were not designated at fair value through profit and loss on initial recognition. The debentures are secured over the land and buildings of the company. The company's financial year end is 31 December. Required 1.1 Prepare an amortisation table showing the amount of premium that would be provided each (11) year over the life of the debenture. 1.2 Prepare all the journal entries relating to the debentures from the 2010 financial year to the end (18) of 2012, induding closing entries. 1.3 Show how matters relating to the debenture will be disclosed in the financial statements and (11) notes of Magoda Limited for the 2012 financial year end