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Hi Mike,
I appreciate i’ve left this a bit late, so sorry!
Why is it that we sometimes land up with a different figure for the interest charge in the SOPOL and for the finance charge to go in the SOFP?
eg in the following example from the mini exercises:
“The company issued a $25 million 6% loan note on 1 October, 2011. Issue costs were $1 million and these have been charged to administrative expenses. The loan will be redeemed on 30 September, 2014 at a premium which gives an effective interest rate on the loan of 8%.
What finance charge will appear in the statement of profit or loss for the year ended 31 March, 2012.”Thanks
Sometimes the finance charge is written off (issue costs) without going into the value of the obligation (Dr Finance Costs Cr Cash)
Other times the interest charge is debited to profit or loss and credited to the loan account (Dr Finance Costs Cr Loan Account)
Does that answer it for you?
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