Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Chrysos Co VCO Interest
- This topic has 5 replies, 2 voices, and was last updated 7 years ago by John Moffat.
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- September 2, 2017 at 11:11 am #405006
Sir,
I am puzzled by the calculation of value foregone by the VCO, regarding the loan. Why is interest if the loan not included in the value?
September 3, 2017 at 11:16 am #405133I am not clear what you are asking. The answer has used the profit before interest.
(In future please do say which exam the question is from – I can’t remember the name of every question in every exam 🙂 )
September 3, 2017 at 2:18 pm #405179Sorry sir, i was in a rush while typing the question and forgot to add in the details. Mar/June 2017 Question 1.
In the calculation of the value foregone by the VCOs, why is the value of their unsecured bonds 4,800m (which is the book value in the financial statements)? I am puzzled as to why the book value is used to calculate the value of the unsecured bonds without considering the interest payments that the VCOs would lose from cancelling the bondsSeptember 3, 2017 at 2:35 pm #405185Just suppose you have $100 in the bank (earning interest) and the bank collapses and you lose your money. How much would you say you had lost? Surely you have lost $100.
If you have $100 in your pocket, you don’t claim that it is actually more than $100 because ti could earn interest in the future. It is the same thinking 🙂
September 3, 2017 at 3:56 pm #405201thank you sir, its much clearer now
September 3, 2017 at 4:26 pm #405205You are welcome 🙂
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