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September 8, 2021 at 5:02 pm
This was a great lecture. I now have a better understanding of financial assets and how they are recorded. The debentures was a little tricky because of the terminologies used; especially where the coupon rate is actually calculated on the par value.
The journal entries also made things quite clear for me personally. Thanks
August 4, 2021 at 10:53 am
Example 1 part 3
My thinking that the effective interest rate is supposed to be used in discounting cash flows as opposed to actually using it to compute finance income as done by the lecturer.
I mean that the EIR should be used in discounting the 40,000 future payments and the future payment of 100 plus premium.
Could you please clarify on this or explain a little bit more.
April 23, 2022 at 12:00 am
Hi there, for the effective interest rate you need to calculate IRR, Internal rate of return. You can use the excel Function to find that, which is the rate at which the present value of all the cash flows from the initial investment and future payments plus premium will become zero. If you use the effective rate of interest to discount the future payments you will arrive at the initial fair value of the investment, so why would we bother? we can just use the initial investment amount less discount and transaction costs.
June 16, 2021 at 3:32 pm
Please for example 2, my kaplan textbook FR, says that i should take the OCI to P&L. i.e. the remaining 50,000 in OCI after Dr Cash 650,000, Cr Financial asset 620,000, Cr OCI 30,000. And this appears consistent with the understanding on realised gains and losses, since the asset is already sold
June 16, 2021 at 3:49 pm
apologies, please ignore, i was wrong
December 3, 2020 at 12:35 pm
Many thanks for this insightful lecture. What about the premium of 5%. How is it treated. Would we ignore until we intend to redeem?. What if the debenture was purchased at a premium of say 5%; how would it have been treated?
March 26, 2020 at 10:02 am
hi question concerning the debentures. after doing the calculation im getting $1049510 as c/d in the 4th year. shouldnt be nil at the end of the year?? can you clarify please thank you
May 18, 2020 at 1:31 pm
I think what you missed out in the calculation is that you didn’t factor into the calculation the redemption value of $1,050,000. If this is factored in you’ll probably be getting nil balance, subject to rounding errors.
July 14, 2020 at 11:04 pm
No. Why would it be zero when you own the asset? It should be close to 1050,000(Which you already had).
July 15, 2020 at 3:07 pm
A light update to my post earlier, yes the balance at end of year four after the debt is repaid should be zero. Norman have to repay the capital + 5% premium.
March 5, 2019 at 1:23 pm
In example 2, the last financial asset, the interest income on the bond (5.71%), is this paid by the bond issuer or paid by Norman who bought the bond?
November 20, 2019 at 7:31 pm
That’s interest income receivable from the bond issuer. Then an asset in the book of Norman and liability in the books of the bond issuer.
July 14, 2020 at 11:06 pm
This is the effective rate of interest which is rate of return.
February 23, 2019 at 9:10 pm
isn’t the outflow in the cash flow statement only if it was paid in cash or r u trying to make the point that this is under investing activities?
August 18, 2019 at 5:29 pm
Do we show the coupon rate intrest and the effective rate intrest in the SCF?
February 11, 2019 at 12:04 pm
Sir, is there any lecture that will be going to upload sooner or later on the impairment of financial assets ?
February 10, 2019 at 7:23 pm
February 10, 2019 at 10:49 pm
August 24, 2018 at 2:28 pm
For example 2 part A – How did you determine that the default classification was FVTPL ?
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