acc Q, redemption of debenture

On 1 Jan 2009,Mall Ltd issued $1200000 of 5-year, 10% debentures at 93; the debentures pay interest half-yearly on 1 July and 1 January. By 1 January 2011, the market rate of interest for debentures of risk similar to those of Mall Ltd had risen. As a result the market value of these debentures was $1000000 on 1 January 2011-below their carrying amount of $1144000.

Jenny Payne, managing director of the Mall Ltd, suggests repurchasing all of these debentures in the open market at the $1000000 price. But to do so Mall Ltd will have to issue $100000(face value) of new 5 year, 17.36% debentures at face value. The managing director asks you as chief accountant:"What is the feasibility of my proposed repurchase plan?"

Q1. Prepare the journal entry to redeem the 5-year debentures on 1 January 2011. Prepare the journal entry to issue the new 5-year debentures.

Q2. Prepare a short memo to the managing director in response to her request for advice. List the economic factors that you believe should be considered for the repurchase proposal.


for the first entry, I know there should be a debit $1144000 for debentures payable, but I don't know how much cash and what is the other account that should be credited.
for the second entry, i think it should be debit cash for $1000000 and credit debentures payable for $1000000

and I completely dont know how to answer Q2...

Can anyone please help me with it thanks