Francine Ltd. is a public corporation and issues $500,000 of 8% bonds on 1 January 2015, incorporating the following relevant data. Francine Ltd. has a December 31 fiscal year-end.

Bond date1 January 2014

Maturitydate31December 2018

Interestdates30June; 31 December

Yieldrate4%

REQUIRED:

a) List the three essential characteristics of a "liability" under accounting standards and indicate which date the bond payable must be recognized as a liability of Francine Ltd. (5 marks)

b) Prepare the journal entry to record the bond issue.