On 1 July 2021, Jill Ltd acquired some corporate bonds issued by Soy Ltd • These bonds cost $1 038 870. They had a ‘face value’ of $1 million and offered a coupon rate of 10 per cent paid annually ($100 000 per year, paid on 30 June). The bonds would repay the principal of $1 million on 30 June 2026 • At the time the market only required a rate of return on 9 per cent on such bonds • Jill Ltd operates within a business model where government bonds are held in order to collect contractual cash flows and there is no intention to trade them • Assume that there were no direct costs associated with acquiring the bonds Based on the above information, calculate the amortised cost of the bonds as at 30 June 2022, 2023, 2024, 2025 and 2026
Debenture Valuation
A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.
Note Valuation
It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:
On 1 July 2021, Jill Ltd acquired some corporate bonds issued by Soy Ltd
• These bonds cost $1 038 870. They had a ‘face value’ of $1 million and offered a coupon rate of 10 per cent paid annually ($100 000 per year, paid on 30 June). The bonds would repay the principal of $1 million on 30 June 2026
• At the time the market only required a
• Jill Ltd operates within a business model where government bonds are held in order to collect contractual
• Assume that there were no direct costs associated with acquiring the bonds
Based on the above information, calculate the amortised cost of the bonds as at
30 June 2022, 2023, 2024, 2025 and 2026
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