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Financial Accounting & Reporting 2 QUESTION 2 Wide Angle Bhd is constructing a new office building at a cost of RM2 million. When building is
Financial Accounting & Reporting 2
QUESTION 2 Wide Angle Bhd is constructing a new office building at a cost of RM2 million. When building is in the final stage of completion Wide Angle Bhd faces financial difficulties as the company needs a fund amounted RM450,000 to complete the construction. The management team of Wide Angle Bhd decides to issue bonds instead of shares since that is a way to raise capital without diluting the current shareholders' equity. The RM450,000 of 8%, 5-year bonds were issued on 1 January 2019 and pay interest semi-annually on each 1 January and 1 July, which the payment is starting on July 2019. The market rate of bonds yield 6%. The financial year ends on 30 September. Wide Angle Bhd uses the effective interest method to amortize bond premium or discount (a) (b) Prepare the journal entry to record the issuance of the bonds on 1 January 2019 Prepare the journal entry to record the related transactions of bonds on 1 July 2019 and 30 September 2019 Assume that Wide Angle Bhd was unable to sell the bonds dated 1 January 2019 until 1 March 2019, two months after they are dated. Explain the accounting treatment to record issuance of the bonds between interest date and interest expenses on 1 July 2019. (c) Present Value TableStep by Step Solution
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