Bianca Limited purchased an 18% CU500,000 debenture at 105 on 1 July 2013. The debenture was issued by CARMEN LIMITED, a company that trades on the JSE Limited. The debenture will be redeemed by Carmen Limited on 1 July 2015 at 95. Interest is payable six-monthly on 1 January and 1 July. The market related interest rate on similar debentures with similar terms is 12,81497% per annum. Carmen Limited’s reporting date is 30 June.
The objective of Bianca 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. Carmen Limited did not designate the debenture as measured at fair value through profit or loss.
REQUIRED
1. Prepare the general journal entries (cash transactions included) of Carmen Limited for the period 1 July 2013 to 1 July 2015 (inclusive) to account for all matters related to the above transaction. Journal narrations are not required.
2. Prepare the Debentures Liability general ledger account for the period 1 July 2013 to 1 July 2015 (inclusive), properly closed off.
| NOTES: | – Ignore transaction costs. |
| – Round calculated Currency Unit (CU) amounts to two decimal places. | |
| – Round interest rates calculated to five decimal places. |
🇿🇦 Bianca means “fair”, “white” and “shining” and is of Italian origin.
🇿🇦 Carmen means “poem: and is of Latin origin.
