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Dear Mike,
Q5:
The company issued a $25 million 6% loan note on 1 October, 2011. Issue costs were $1 million and these have been charged to
administrative expenses. The loan will be redeemed on 30 September, 2014 at a premium which gives an effective interest rate on the
loan of 8%.What finance charge will appear in the statement of profit or loss for the year ended 31 March, 2012
In my opinion the anwser should be:
24m @ 8% * 6/12 = 0.96m
(24m+1m) @ 6% * 6/12 =0.75m
Difference 210,000Dr Loan interest (finance charges) 210,000
Cr 6% loan account (liabilities) 210,000Loan interest in the profit or loss account 960,000
6% loan on statement of financial position 24,210,000Open tuition anwser:
Answer 5
24m @ 8% = 1.92m
24m @ 6% =1.50m
Difference 420,000Dr Loan interest (finance charges) 420,000
Cr 6% loan account (liabilities) 420,000Loan interest in the profit or loss account 192,000
6% loan on statement of financial position 24,420,000I may be wrong, but is the anwser in the notes correct?
thanks! 🙂
Hi Julian
I hear that Spring has at last sprung in Lt 🙂
Re your question – this (like just about all the mini exercises) is a straight lift from a past exam. This time the question is called Quincy, question 2 from December 2012 and I have to admit to a typing error when I wrote the notes 🙁
The year end should have read 30 September, 2012 and not 31 March, 2012
Does that make a difference to your comments? Check out the ACCA’s own answer for December 2012 exam.
Thanks for pointing out the error
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