Question Two

On 1 July 2020 Sydney Ltd issues $1 million in 10-year bonds that pay interest each six months at a coupon rate of 10 per cent. At the time of issuing the securities, the market requires a rate of return of 12 per cent. Interest expense is determined using the effective-interest method.

Required

1. Determine the issue price.
2. Provide the journal entries at:
3. 1 July 2020
4. 30 June 2021
5. 30 June 2022