Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Fitch Limited issued 1000, 5% secured debentures of R1000 face value at 96% of face value on 1 January 2018. On that date, the finance

image text in transcribed

Fitch Limited issued 1000, 5% secured debentures of R1000 face value at 96% of face value on 1 January 2018. On that date, the finance director determined effective interest rate to be 5, 95807% The terms of issue include the following provisions: i. 200 of 5% secured debentures are to be redeemed at face value at the end of each year starting on 31 December 2020. Debentures redeemed can not exceed 200 debentures in any given year. ii. Interest is payable on 31 December of each year. The company is empowered to purchase debentures on the open market at any time and cancel them if it does so, the debentures to be redeemed (in accordance to ()) at the end of the year in which they are purchased are to be reduced by the nominal value of the debentures purchased. You are informed that, on 30 June 2020, the company purchased 150 of 5% secured debentures at 98% of the face value. You are required to: (a) Complete the debenture amortisation table in the following format. Date Interest paid Effective Discount on Balance on Carrying at 5% interest at discount on amount of 5% 5.95807% amortised issue Debentures Issue 1 January 2018 31 December 2019 31 December 2020 31 December 2021 31 December 2022 31 December 2023 31 Decemter 2024 31 December 2025 [15 marks] (b) Record all the relevant transactions, including cash and interest transactions, in the General Journal of the company for the years ended 31 December 2018, 2019 and 2020. [40 marks]

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

College Accounting, Chapters 1-9

Authors: James A. Heintz

20th Edition

0538745223, 9780538745222

More Books

Students also viewed these Accounting questions