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6% preference shares of $1 each (note (ii)) 52,000
Preference dividend paid (note (ii)) 3,000
The 6% preference shares were issued at par on 1 April 20X3 for $50 million. They
are redeemable at a large premium which gives them an effective finance cost of
10% per annum.
Their solution
(W3) Preference shares
Year b/f Interest @ 10% Payment c/f
$000 $000 $000 $000
31 March 20X4 52,000 5,200 (3,000) 54,200
To finance costs Per trial balance To NCL
Dear sir, is there a printing error in the q?
Shouldnt it be
50000(bal b/f) + 5000(effective interest)- 3000(interest paid) = 52000(at 31 march 20X5)
Ur assistance is kindly needed as i am having my paper on 9th
Thanks a lot
Hi,
I think you need to look at the dates a bit more closely as we are not in the first year of issue of the instrument…….
Thanks