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A company has issued some 9% bonds which are now redeemable at par in 3 years time…. Sir, here when question says 9% bonds and nothing else is mentioned that the interest rate of 9% is before tax or after tax, so here it would be obvious na that the interest rate of 9% is before tax?
If 9% bonds are listed in the SOFP then the interest is 9% on nominal and is always before tax.
(The investor will receive 9% but will have to pay personal tax on it – but this is irrelevant for the exam, personal tax is always ignored in the exam. The company will pay 9% but they will save company tax as a result because taxable profits are after payment of interest.)
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