On 2 January 2016, ME Ltd (ME) issued $10,000,000 5-year bonds for $10,811,090. The stated coupon rate is 10% per annum, and the effective interest rate is 8% per annum. Interest is to be paid semi-annually on 30 June and 31 December. The company uses the effective interest rate method of amortizing bond discounts/premiums. As of its most recent financial year ended 31 December 2017, ME expects its net income before interest and tax to be constant over the next three financial years and does not foresee any further interest-bearing borrowings in the near future. (v) Because of a substantial increase in the market rate of interest, ME purchased all the bonds on the open market at par on 30 June 2018. Prepare the journal entry to record the retirement of the bonds on 30 June 2018. Ignore the journal entry for the interest payment on 30 June 2018.
On 2 January 2016, ME Ltd (ME) issued $10,000,000 5-year bonds for $10,811,090. The stated coupon rate is 10% per annum, and the effective interest rate is 8% per annum. Interest is to be paid semi-annually on 30 June and 31 December. The company uses the effective interest rate method of amortizing bond discounts/premiums. As of its most recent financial year ended 31 December 2017, ME expects its net income before interest and tax to be constant over the next three financial years and does not foresee any further interest-bearing borrowings in the near future.
(v) Because of a substantial increase in the market rate of interest, ME purchased all the bonds on the open market at par on 30 June 2018. Prepare the
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