he Notes to Long term Debt of a company reveals the following facts: March 31. 2019 March 31. 2020 Bonds Payable 4000000 4000000 Unamortized Discount 275000 251000 Carrying Amount of bond 3725000 3749000 The bond was issued on 1st April 2018 The face value of the bond was Rs 1000. The bond carried 5% coupon rate and would mature after 10 years of issuance The interest on bonds was to be served semi-annually The effective rate of interest was estimated to be 6% on the date of issue In the third quarter of 2020 the bonds were traded in the market at Rs 750. The CFO is considering to buyback all the bonds at the market value rather than redeeming those at Rs 1000 each. The company does not have enough of liquidity to finance the buyback. Hence the CFO was exploring the option to issue 4000, 8% bonds at par or 10% bonds at premium in January 2021 through a private placement route. The bonds would mature after 10 years. The prevailing market rate of interest is 8%. You are required to: (5+3+5+5) (1) Explain the numbers reported in the notes to long term debt? (2) Calculate the issue price per bond if it issues 10% coupon rate? (3) Evaluate the impact of debt substitution on cash flow of 2020-21 through 2025-26. (4) Illustrate the bond related expenses/losses/gains to be reported in income statement of 2020- 21 through 2025-26

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