Task 2:

a) On 1 January 2020, Dena plc, a large UK Company decided to raise $1,000,000 finance for extending its business in the overseas market by issuing 10-year Bonds. The company decided to issue these bonds and fixed the interest rate as 6% per annum payable twice in a year, 1st of July and 1st of January. Investors in the market are expecting an effective rate of interest at the rate of 6% per annum.

b) Stella plc, a large UK company is planning to issue $5,000,000, 10% term bonds on January 1, 2020, due on January 1, 2025, with interest payable each July 1 and January 1. Investors are expecting an effective interest rate of 12% for their investment.

You are required to Find out the issue price of the bond and state with reason whether the bond is issued at par or Premium or discount. Enter the necessary journal entries for the issue of the above Bonds and interest and amortization of discount/premium for the year 1.