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1. How do we treat increase in fair value and profit on sale of equity investments in cash flow statement?
2.I attempted a question where debenture interest is recorded as current liability in balance sheet. The finance cost in the income statement is added to the opening balance and closing balance subtracted from it to get interest payment.
It was given in the question that finance cost includes both debenture interest and finance lease finance charge.So how can we use the whole of finance cost to find debenture interest payment when only a part of it is debenture interest expense?Thanks
“How do we treat increase in fair value”
It’s a non-cash matter so needs to be deducted if it’s gone through profit or loss
“How do we treat increase in fair value”
The same as you would treat a profit on sale of a tangible non-current asset
Deduct the profit figure from pbit
Add in the cash received into investing activities
Do we know the coupon rate of the debenture? It’s likely that we do so we can therefore see how much of that total finance charge is accounted for by (say) 8% of the face value of the debenture
Does that work for you?
NCL 2008. 2007
6% debenture. 150. 100CL
Debenture interest. 5. –Finance cosr in P/L. 15
This is the info given.There is finance lease also in liabilities.
Ok (I really love it 🙂 when I keep having to ask for more and more information! )
Clearly there was an issue of debentures during the year – is the date given?
Any chance you could give me details of the finance lease payables in both current and long term liabilities for both years
In fact, would it be easier to give me the name / exam reference date of the question and I can find these details from the source?
The new debentures were issued on 1 April 2007. Finance cost includes debenture interest and finance lease finance charges only.
NCL. 2008. 2007
Finance lease liab. 100. 80
CL
Finance lease liab. 17. 12Dickson purchased $56000 of PPE by finance lease, payments being made in arrears on the last day of each accounting period
I could now ask you for the accounting year end date!
But I won’t … you recklessly let me know the name of the question “Dickson purchased $56000 of PPE …” so the internet enabled me to find it by leading me to the BPP question
The year end is 31 March and we’re looking at the financial statements – profit or loss for the year to 31 March, 20X8 and financial position as at 31 March, 20X8
There were $100 6% debentures brought forward but this obligation was increased to $150 on the first day of the accounting period
Therefore a full year’s finance costs in terms of debenture interest is 6% x $150 and that equates to $9
Look in the statement of profit or loss and there’s $15 and a full year’s debenture interest is $9 so the finance costs must be the balancing figure of $6
But, in the statement of financial position, there’s a current liability of $5 debenture interest so that means that only $4 ($9 – $5) debenture interest has been paid
Therefore aggregate interest PAID during the year must be $4 debenture interest and $6 finance lease finance costs = $10
OK now?
In future, please try to include all relevant information 🙂
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