On 1 July 2018 BMW 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)" 1-1/(1+k)" Formula for present value of annuity of $1 per period for n periods : k where, k is the discount rate expressed in decimal

On 1 July 2018 BMW 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)" 1-1/(1+k)" Formula for present value of annuity of $1 per period for n periods : k where, k is the discount rate expressed in decimal

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Subject: Advanced Financial Accounting

Question has been provided on attached picture below,

Required:
(i) Determine the issue price of the debenture.
(ii) Provide the journal entries at 1 July 2018 and 30 June 2019.

On 1 July 2018 BMW 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)"
1-1/(1+k)"
Formula for present value of annuity of $1 per period for n periods :
k
where, k is the discount rate expressed in decimal

Definition Definition Method of recording financial transactions in the book of original entry by debiting and crediting the accounts affected by a transaction using the golden rules of accrual accounting.

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ansser must be in table format or i will give down vote