Prepare the entries to record first annual interest accrual

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On January 1, 2017, Barclays bank issued 8 %, 5-year bonds with a face amount of K750, 000 to Puma Zambia Interest is payable annually at the beginning of the year. The bond is issued for an effective interest rate of 10%. In addition to the purchase price Puma paid the broker K 30,000 to facilitate the purchase of this bond.

Required

Question a) Calculate the value of the bond and prepare the entries to record the issuance of the bonds in the books of Barclays and Puma

Question b) Prepare the entries to record the first annual interest accrual and the payment assuming that the company uses effective-interest amortization. In both Barclays and Puma

Question c) At the end of year 3 Barclays decided to buy back this bond at a cost of K600, 000. Calculate the gain on loss on this transaction and show the double entry also advice if the bond should be bought back. In both Barclays and Puma

Reference no: EM132512238

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