Question: On 1 July 2018, Grommet Ltd issues a five-year bonds with a total face value of $1,000,000 and a coupon rate of 10% per annum,

On 1 July 2018, Grommet Ltd issues a five-year bonds with a total face value of $1,000,000 and a coupon rate of 10% per annum, payable annually in arrears. The market required interest rate for the Bond was 8%.

REQUIRED:

1. Provide the journal entry to issue of the bond for Grommet Ltd on 1 July 2018. (2 Marks)

2. Calculate the amortized cost of the bonds as at 30 June 2019 by preparing a schedule of amortized cost/interest payment. (3 marks)

3. Provide the journal entry to account for the year ending 30 June 2019. (2 marks)

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