On 1st January 2018, Travolta Holdings issued a term bond off the market with a normal value of ksh. 100 million. The coupon rate is 6.5% but the market demands a return of 7%. The loan has 4 years to run and the company's financial year begins on 1st January and ends on 31st December.

Required

a) Determine the fair value of the bond

b) Prepare an bond amortisation schedule for this financial liability.

c) Using journal entries, demonstrate the initial and subsequent recognition of this financial liability.