QUESTION 1 (15 Marks) On 1 February 2018, Remy Film Bhd. issued 9% bonds with the principal amount of RM80 million. The bonds mature on 31 January 2022. The market yield for the bonds of similar risk and maturity was 10%. Coupon for the bond is paid semi-annually on 31 July and 31 January. Mia Filza Industries acquired the bonds with the nominal value amounted RM80,000 as a longterm investment. The financial year of both firms ends on 31 December.

Required:

a) Determine the price of the bonds issued on 1 February 2018. (3 marks)

b) Prepare a schedule which indicates Remy Film Bhd. effective interest expense on bonds and principal bond payments throughout the term of the bond. Prepare the journal entries to record the issuance of the bonds, payment of coupon and interest expense from the date of issuance until 31 January 2020. (9 marks)

c) Would the amount in (a) and (b) above differ if the bonds paid the coupon interest semiannually? Explain. (3 marks)