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At 30th June 2002 a company had $1m 8%loan notes in issue, interest being paid half-yearly on 30 june and 31 december.
On 30 september 20X2 the company redeemed $250,000 of these loan notes at par, paying interest due to that date.
On 1 April 20×3 the company issued $500,000 7%loan notes , interst payable healf-yearly on 31 March and 30 September.
What figure should appear in the company’s statement of profit or loss for interest payable in the year ended 30 june 20X3?Ans
July-Sept 1000,000 x 8% x 3/12
Oct – March750,000 x 8% x 6/12
April- June 750,000 x 8% x 3/12
500,000 x 7% x 3/12 so total 73,750
sir i dont get this how 750,000 has come? what is the concept being overlined here in this question? interest payable is usually in the sofp not in the profit and loss account..the interest charge is usually in the sopl..i dont get the 500,000 x7%x3/12 part?I do not know why you mention the SOFP. The question asks for the expense in the SOPL and this is what has been calculated.
From 1 July 2002 to 30 September 2002 (3 months), there were $1M loan notes in issue and therefore the interest expense for this period was 8% x $1M x 3/12.
On 30 September they repaid $250,000, and so there were $750,000 loan notes in issue from 30 September to 31 March. So the interest for these 6 months is $750,000 x 8% x 6/12.
On 1 April they issued another $500,000 7% loan notes, but they still have $750,000 8% loan notes, so the interest for the remaining 3 months is $500,000 x 7% x 3/12, together with $750,000 x 8% x 3/12.
When the interest is actually paid is of no relevance. As always, in the SOPL we charge the expense for the period. (If it has not all be paid, then the amount still owing appears in the SOFP, but you are not asked about this.)
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