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The redemption date was not given. Iam assuming 10% was the original effective interest rate, which should have been used. If it is poossible, try to download the question and suggested answer on the ACCA website.
Regards.
What about the 10% ? ” Paradigm issued to the shareholders of Strata a $100 10% loan note for every 1,000 shares it acquired in Strata”. My assumption is that the effective inerest rate is same as the coupon rate?. If there will be no amortisation, then for subsequent measurement are you proposing to measure the loan note at fair value?.
I am not staisfied with the answer. The question question clearly stated that the loan note was not accounted and that is why if you check the suggested answer, the loan note was increased from $ 8000 to $9,500. I would appreciatte if you can check both question and answer before responding (F7 June 2013 Question 1). Below is part of the question
On 1 October 2012, Paradigm acquired 75% of Strata’s equity shares by means of a share exchange of two new
shares in Paradigm for every five acquired shares in Strata. In addition, Paradigm issued to the shareholders of
Strata a $100 10% loan note for every 1,000 shares it acquired in Strata. Paradigm has not recorded any of the
purchase consideration, although it does have other 10% loan notes already in issue.