LINDIWE LIMITED is listed on the JSE Limited and its reporting date is 31 December. On 1 January 2015, Gwen Limited purchased a 10% CU10,000 debenture at fair value, that was issued by Lindiwe Limited. The debenture deed provided that the debenture would be repaid to the debenture holder in two equal annual amounts on 31 December at 110 with the first repayment on 31 December 2015. Interest is payable on 31 December of each year. The market related interest rate on similar debentures with similar terms is 16,5% per annum. Transaction costs of CU500 were incurred by Lindiwe Limited.
The objective of Gwen Limited’s business model is to hold the debenture in order to collect contractual cash flows. The contractual terms of the debenture give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The asset was at no stage credit impaired. Ignore expected credit losses. Lindiwe Limited did not designate the debenture as measured at fair value through profit or loss.
REQUIRED
- Prepare the general journal entries (cash transactions included) of Lindiwe Limited for the period 1 January 2015 to 31 December 2016 (inclusive) to account for all matters related to the above transaction. Journal narrations are not required.
- Prepare the Debenture Liability general ledger account in the books of Lindiwe Limited for the period 1 January 2015 to 31 December 2016 (inclusive), properly closed off.
| NOTES: | – Round calculated Currency Unit (CU) amounts to two decimal places. |
| – Round interest rates calculated to four decimal places. |
🇿🇦 Lindiwe is a Zulu name meaning “waited for”.
🇿🇦 Gwen means “white circle”, “fair” or “blessed one”.
