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Example 2, Chapter 11

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Example 2, Chapter 11

  • This topic has 2 replies, 2 voices, and was last updated 1 year ago by qilianm.
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    Posts
  • May 21, 2021 at 11:41 am #621314
    qilianm
    Member
    • Topics: 21
    • Replies: 12
    • ☆

    Hi,

    I have a quick question on the example 2 from Chapter 11 lectures in relating to financial liabilities. What confuses me is that at 13:23 we can see B/F+ Financial Cost – Coupon =C/F. I am not quite sure why the financial cost needs to be added onto the money that we received from issuing shares. Who is liable to the financial costs here? Thanks.

    May 22, 2021 at 9:39 am #621415
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6440
    • ☆☆☆☆☆

    Hi,

    As we have issued debt then interest will accrue on the outstanding amounts, hence the finance cost is added to the opening balance. We are liable for these costs and we then make the payment towards them based on the coupon rate that reduces the outstanding liability.

    Thanks

    May 22, 2021 at 7:45 pm #621472
    qilianm
    Member
    • Topics: 21
    • Replies: 12
    • ☆

    Thanks a lot, really appreciate it

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