Question 3 (7 marks)

(This question is from the Week 8 Tutorial)

BDX company issues $ 15 million of five-year, 6.5 per cent, semi-annual coupon debentures to public which pay interest each six months. The market also requires a rate of return of 6.5 per cent. Assume that the moneys come in and the debentures are allocated on the same day, 30th June, 2019.

Required:

Provide the accounting entries at 30th June, 2019, 31st December, 2019 and 30th June, 2024 to record:

(a) The receipt of funds. (2 marks)

(b) The first payment of interest (2 marks)

(c) The redemption of the debentures (2 marks)

(d) In your own words, explain how you would determine the discount or premium on a

debenture issue? (1 mark)

HA3011 Advanced Financial Accounting Tutorial Questions Assignment