Forums › ACCA Forums › ACCA FR Financial Reporting Forums › March/June 2019 #32. Vernon – Financial Asset
- This topic has 1 reply, 2 voices, and was last updated 4 years ago by Tom85.
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- August 30, 2020 at 9:21 pm #582785
Hi
I have a question about the amortization schedule of Financial Asset, not Financial LiabilityQ: Vernon Co acquired $9m 5% bonds at par value on 1 January 20X8. The interest is receivable on 31 December each year. Vernon Co incurred $0·4m broker fees when acquiring the bonds, which has been expensed to operating expenses. These bonds are repayable at a premium so have an effective rate of 8%. Vernon Co has recorded the interest received on 31 December 20X8 in investment income.
The answer says that
b/f Int 8% Payment c/f
9,400 752 (450) 10,602I think that the amortization schedule should be different from the Financial Liability but I don’t understand why the c/f comes to 10,602. I thought that it was supposed to be 9,702 (9,400+752-452). Can you please elaborate this why the the result is different between FA and FL?
Thanks.
September 4, 2020 at 12:45 pm #583421There’s a revision video on this topic. It’s a P&L so you won’t need the c/f value, just the income from investment.
It doesn’t look right to me either, except the interest paid is 450 because it’s 5% based on the value of the bonds, rather than the cost of bonds plus expenses.
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