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Determine the issue price of the debenture

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Reference no: EM132527153

Question -

a) What factors should be considered in determining the issue price of a debenture.

b) On 1 July 2018 Bombo Ltd issues $2 million in six-year debentures that pay interest each six months at a coupon rate of 8 per cent. At the time of issuing the securities, the market requires a rate of return of 6 per cent. Interest expense is determined using the effective-interest method.

Required: (i) Determine the issue price of the debenture.

(ii) Provide the journal entries at: 1 July 2018, 30 June 2019, & 30 June 2020.

Reference no: EM132527153

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