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Determine the issue price of the debenture

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Reference no: EM133017599

Question - On 1 July 2018 JTX Ltd issues $2 million in 10-year debentures 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.

Formula for PV of $1 in n periods =1/(1+k)n

Formula for present value of annuity of $1 per period for n periods = where, k is the discount rate expressed in decimal

REQUIRED -

(i) Determine the issue price of the debenture.

(ii) Provide the journal entries at 1 July 2018 and 30 June 2019.

Reference no: EM133017599

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