On 1 July 2022 Kiama Ltd issues $5 million in five-year bonds that pay interest every six

Question:

On 1 July 2022 Kiama Ltd issues $5 million in five-year bonds that pay interest every six months at a coupon rate of 8 per cent. At the time of issuing the securities, the market requires a rate of return of 10 per cent. The interest expense is calculated using the effective-interest method.


REQUIRED

a. Determine the issue price.

b. Provide the journal entries at:

i. 1 July 2022

ii. 30 June 2023

iii. 30 June 2024

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