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Paradigm issued to the shareholders of Strata
a $100 10% loan note for every 1,000 shares it acquired in Strata
As the answer, The consolidated FP just account for the proceeds of the loan 10% ($1500), why the finance cost of this loan is not accounted for and charge to Parent’s RE. Thank you!That $1,500 to which you refer is not the proceeds of the loan issue – it’s the face value of the loan notes that Paradigm has issued to the former shareholders of Strata
It’s part of the cost of acquisition
As for the loan interest of 10% * $1,500 * 6/12 ($75) … I see nothing in the question to indicate that this has not already been reflected within the Paradigm reported figures and, in particular, the Paradigm figure of $7,400 Retained Earnings for the year ended 31 March, 2013
OK?
i think that because the loan notes has not been recorded then the interest on it as well, is this wrong? thank you.
I don’t see that the one necessarily precludes the other
Paradigm does have other 10% loan notes in issue so, when making the payment of interest to these other loan note holders, why would Paradigm not also make the interest payment to the new loan note holders?
I do, however, agree with you in that the question is not clear as to whether or not the loan interest has been accounted for and the question would be improved by the inclusion of that information
OK?
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