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Dear,sir
please can you check i did right or not for this 2 questions:
Q1 A 8% loan note having a value of 900,000 $ was issued on 1 January 2013 at discount and proceeds were 840,000 $ transaction cost for the issue were 30,000 $ . the loan note will be redeemed on 31 December 2016 at par . the effective interest rate applicable is 11% per annum. at what amount will the loan note appear in statement of financial position as at 31 December 2014 and what is the finance cost
Answer 1 :
2013
Capital balance ( 840,000-30000) = 810000
Interest 11% 89100
Interest (900,000*08%) 72000
827100
2014
Interest 11% 90981
Interest paid 8% 72000
846081Statement of profit or loss 2014
Finance costs
90981
Statement of financial position –
8% loan notes
846081
——————————————————————————————————-
Q2
On January 2011 a company hired machine under financial lease for 4 years the cash price of the machine was 300,000 and present value of minimum lease payment was 280,000 million instalments of 80,000 are payable annually in advance with the first payment made on January 2011 the interest are implicit in the lease is 7.5 % what amounts will appear in financial statements on December 31 2012.Answer 2
PVMLP 280,000
Payments 80,000
200,0000
Interest 7.50% 15000
Balance 31-12-2011 215,000
Payment 80,000
135000
Interest 7.50% 10125
Balance 31-12-2012 124,875
Statement profit and loss 31-12-2012
Finance costs 10125
Statement of financial position 31-12-2012
Non-current liabilities
Finance lease liability 124,875
current liabilities (215,000-12875) = 90125thank you very much for your attention
Answer 1 is fine
Answer 2 – I’m ok to here (but putting dates in would have helped!):
1. 1.11 PVMLP 280,000
1. 1.11 Payment 80,000
1. 1.11 Capital Balance 200,000
31.12.11 Interest 7.5% 15,000
31.12.11 Balance 215,000
1. 1.12 Payment 80,000
1. 1.12 Capital Balance135,000
31.12.12 Interest 7.5% 10,125So, at 31 December 2012, the capital amount outstanding is $135,000 and there is accrued interest of $10,125 (you have $124,875 capital amount outstanding and that is incorrect)
Continuing the schedule:
1. 1.12 Capital Balance135,000
31.12.12 Interest 7.5% 10,125
31.12.12 Balance 145,125
1. 1.13 Payment 80,000
1. 1.13 Capital Balance 65,125
31.12.13 Interest 7.5% 4,884
31.12.13 Balance 70,009Now the example gets silly because when we pay the fourth instalment tomorrow (1 January, 2014) we shall have overpaid the obligation by $9,991
Is that ok for you?
NB What’s this last line of your post?
“current liabilities (215,000-12875) = 90125”
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