1). On 1 July 2018 Rankin Ltd issues $1 million in 10-year debentures that pay interest each...

Question:

1). On 1 July 2018 Rankin Ltd issues $1 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. The debentures have been issued via private placement.

Required:

Prepare the general journal entries at:

i. 1 July 2018

ii. 30 June 2019

iii. 30 June 2020

2). On 1 January 2010, Hay Ltd had the following shareholder's equity accounts.

Share Capital..........................$4,100,000

Retained Earnings.....................3,200,000

The number of ordinary shares issued is 260,000. During the year, the following transactions occurred.

April 1 Declared a $1.50 cash dividend per share to shareholders of record on 15 April, payable I May.

May 1 Paid the dividend declared in April.

June 1 Announced a 2-for-I share split. Prior to the split, the market price per share was $24.

Aug 1 Declared a 10% bonus issue to shareholders out of retained earnings, distributable 31 August. On 1 August, the market price of the shares was $10 per share.

31 Issued the shares for the share dividend.

Dec 1 Declared a $1.50 per share dividend to shareholders of record on 15 December payable 5 January 2011.

31 Determined the profit for the year was $600 000.

Required:

Prepare general journal entries to record the above transactions and the closing entry for profit.

Debentures
Debenture DefinitionDebentures are corporate loan instruments secured against the promise by the issuer to pay interest and principal. The holder of the debenture is promised to be paid a periodic interest and principal at the term. Companies who... Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...