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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Coupon rate versus Effective interest rate
Hello Tutor,
Could you kindly explain this schedule to me? What is the difference between interest receive and interest income here?
Purchased 8%loan notes = $100000
Effective rate = 10%
Amortisation schedule:
B/d $100000
Interest received = $8000 ( 1000000*8%)
Interest income = $ 10,000 (100000*10%)
Amortisation – cash to be recived = 10,000- 8000 = $2000
Hi,
The terminology used here is very confusing. The $8,000 is the interest income recognised through profit or loss. The $10,000 is the coupon cash receipt that reduces the outstanding loan notes balance.
Thanks