Wavic Power has 8% 10 year debentures that mature on the 30th June 2018. The debentures were issued on 30 June 2008 and Wavic Power pays interest each 30 June and 31 December. Required: a) Will the debentures be issued at par, at a premium or at a discount if the market interest rate on the date of the issue was 7%? If the market interest rate was 9%?

b) Wavic Power issued 100,000 of the debentures at 94.

i. Record the issue of the debenture on 30 June 2008

ii. Record the payment of interest and the amortisation of the discount on 31 December 2008. Use the straight line amortisation method

iii. Calculate the debentures carrying amount at 31 December 2008 (1 mark) iv. Record the payment of interest and amortisation of discount on 31 December 2009.