BPP F7 Xtol(6/14 amended), a question about finance cost

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September 4, 2018 at 2:29 pm #471320

snowbro
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Hello!I was working through the single entity financial statement preparation and came across this problem.
The question basically can be rephrased as that there is this 5% $50000 loan note, market rate 8%, and the initial financial liability component is correctly calculated as $45950, what is the finance cost in the first year?
The answer states that the finance cost is 45950*8%-50000*5%=3676-2500=1176.
But wait, finance cost can be offset by payment??! I am utterly confused. Isn’t it supposed to be just 3676 and the 2500 goes like Dr. Loan note Cr. Interest payable and has nothing to do with finance cost?

September 4, 2018 at 2:34 pm #471322

snowbro
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Oh, sorry, I get it now, the people responsible for preparing the financial statement in this question has included the $2500 payment part instead of the $3676 part and the $1176 is the part that missed.
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