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Suppose that on 1 October 2004 Viaggimmagine SpA, an Italian tour operator, issued bonds for EUR 1 million, at an interest rate of 5 per cent per annum, with semiannual interest payments, to be redeemed on 30 September 2015.

(a) Using the accounting equation, prepare a summary of the issuance of the bonds assuming that they were issued at:
• par value
• a discount of EUR 10,000
• a premium of EUR 50,000.

(b) Using the accounting equation, summarise the issuance of the first two semiannual interest payments.

(c) What should you account for at 31 December 2004? Why?

(d) How do you account for the redemption at 30 September 2015?

Financial Management, Finance

  • Category:- Financial Management
  • Reference No.:- M92094482

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