QUESTION 2 - (10 MARKS)

On 1 July 2022 Kiama Ltd issues $5 million in five-year bonds that pay interest every six months at a coupon rate of 8 per cent. At the time of issuing the securities, the market requires a rate of return of 10 per cent. The interest expense is calculated using the effective-interest method.

1. Determine the issue price. (2.5 marks)

Issue Price= Coupon Payment

2. Provide the journal entries at:

1. 1 July 2022 (2.5 marks)

Type answer here

2. 30 June 2023 (2.5 marks)

Type answer here

3. 30 June 2024. (2.5 marks)