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Jejak Bhd faces financial difficulties as the company needs a fund amounted RM900,000 to complete the construction of a building. The management team of Jejak Bhd decided to issue RM900,000 of 6%, 5-year bonds. The market rate of bonds yield 8%. The bonds were issued on 1 January 2020 and pay interest semi-annually on each 1 January and 1 July. On 2 July 2021, Jejak Bhd calls the entire bonds at 93 and cancels the entire bonds. Jejak Bhd financial year ends on 31 October. Jejak Bhd uses the effective interest method to amortize bond premium or discount. REQUIRED: (Round your answer to the nearest RM) (a) Prepare the journal entries to record the issuance of the bonds on 1 January 2020. (4 Marks) (b) Briefly explain the accounting treatment for the related transactions of bonds on 1 July 2020 and 31 October 2020. (6 Marks) (c) Prepare the journal entries to record the reacquisition and cancellation of the bonds. (3 Marks) (d) Briefly explain why investors would buy a bond that is trading above its par value. (2 Marks) Extract from Present Value Table: Present value of an Ordinary Annuity of RM1 (n)/ Present value of RM1 (i) 3% 4% 6% 8% 3% 4% 6% 8% 5 0.86261 0.82193 0.74726 0.68058 4.57971 4.45182 4.21236 3.99271 10 0.74409 0.67556 0.55839 0.46319 8.53020 8.11090 7.36009 6.71008

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