Present Value tables

On 1 July 2014, ABC Limited issued $10 million in five year debentures that pay interest 
each six months at an annual coupon rate of 10%. The debentures will mature on 30 
June 2019, which is also the date of the final interest payment. At the time of the issue 
of the debentures, the market rate of return is 12%. 

Required: 

1. Determine the issue price of the debentures and calculate any premium or discount. 
Show workings. Note – you will need to use the Present Value tables. These are 
available in the textbook and on the unit’s Blackboard site. 

2. Provide journal entries in the accounts of ABC Limited on the following dates: 

 1 July 2014 
 30 June 2016 
 30 June 2019