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Q5. Assume that a Financial Corporation issued SAR 500,000 of 8% term bonds on January 1, 2021, due on January 1, 2026, with interest payable each July 1 and January 1. Investors require an effective-interest rate of 6%. Is, the bond issued at a premium or discount? Calculate the bond proceeds and pass journal entry to on date of issue, Jan. 1, 2021 and to record first payment and amortization of the premium on July 1, 2021. (2 Marks)

Note: PV of principal amount at 6% is 0.74409 and PV of interest amount at 6% is 8.53020

Answer