loan note with premium

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    JingQin
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    Hi.
    In the December 2010 past exam paper of F7(international), the question 2, the note 2 is about 8% loan note with a premium. After looking through the answer, i still cannot understand how to get the carrying amount of the loan note of ‘$30.6 million’. At first, i planed to use the present value method, but i got a number which is less then $30 million.
    Thank you. Best wishes


    Avatar of Najiya
    Najiya
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    (in $000)
    1 Oct 20X0 – loan issued = $30,000
    1st yr
    effective interest for the yr = 10% * $30,000 = 3,000
    interest paid = 8% * 30,000 = 2,400
    Carrying value as at 1 Oct 20X1 = 30,000 + 3,000 – 2,400 =30,600 (given in trial balance)

    2nd yr
    effective interest for the yr = 10% * 30,600 = 3,060
    interest paid (given) = 2,400
    Carrying value as at 1 Oct 20X2 = 30,600 + 3,060 – 2,400 = 31,260

    I/S finance cost for the yr ended 30 Sept 20X2 = 3,060
    SFP 8% loan note = 31,260

    Hope that helps


    Avatar of MikeLittle
    MikeLittle
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    Thanks Najiya

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