Reference no: EM132774575
English Bay Limited (EBL), an IFRS reporting company with a December 31 year end, wants to raise capital on the bond market. EBL had the securities lawyers write up a debenture bond issue for 15 years at a face value of $12,000,000 and a coupon rate of 3%. The bond issue was dated and ready to take to market on October 1, 2019 with semi-annual interest payments (October 1 & April 1).
The underwriters, monitoring the market interest rates, convinced EBL to wait and the bond was actually taken to market on April 1, 2020 at a yield rate of 4%. The Bank of Canada rate at the date of issue was 1.5%.
EBL applies a separate bond discount or premium account, as required.
Required:
Problem 1: Prepare entries, with supporting calculations, at the following dates:
1. Date of bond issue, April 1, 2020
2. October 1, 2020.
3. December 31, 2020
4. April 1, 2021
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