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Hello Michael,
could you please explain why we need to reduce amount of financial liability for PAID interest 300,000. In fact, questions says that interest is payable annually in arrears. We will pay this one day later than our financial statements’s date.. So 31 March 20X8 we haven’t paid it yet!“59 Pingway:
Pingway issued a $10 million 3% convertible loan note at par on 1 April 20X7 with interest payable annually in arrears. Three years later, on 31 March 20Y0, the loan note is convertible into equity shares on the basis of $100 of loan note for 25 equity shares or it may be redeemed at par in cash…Show the extracts of Pingway’s statement of financial position as at 31 March 20X8.”
Hi Spanish alcoholic fruity drink!
“Payable in arrears” means that it’s paid at the end of the year so, in this case, on 31 March.
“Payable in advance” means the first payment is o 1 April and subsequent payments are also on successive 1 Aprils
OK?
Hi ,
Can the 8% interest cost of the non convertible bond be taken as the effective interest cost?
Also can it be concluded that the effective interest cost of a convertible bond is equal to the interest rate of a similar non convertible bond?8% as effective interest rate? Yes, I suppose so – but for the sake of clarity I think your examiner will tell you if different.
Similar cost? No! The right of conversion into equity will probably mean that the effective rate is lower than the non-convertible bond
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