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At 30 June 20X2 a company had $1m 8% loan notes in issue, interest being paid half-yearly on 30 June and 31 December.
On 30 September 20X2 the company redeemed $250,000 of these loan notes at par, paying interest due to that date.
On 1 April 20X3 the company issued $500,000 7% loan notes, interest payable half-yearly on 31 March and 30 September.
What figure should appear in the company’s statement of profit or loss for interest payable in the year ended 30 June 20X3?
SIR I’m really confused in this question kindly can you please enlighten me through this, I’ll be very thankful for your time and patience.
Why are you attempting questions for which you do not have an answer? You should be using a Revision Kit from one of the ACCA approved publishers – they have answers and explanations. So ask about whatever it is in the answer that you are not clear about and then I will explain.
I assume that you have watched my free lectures on this? The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
I’m sorry SIR, actually I’ve been attempting online questions related to F3 & almost 99% attempt was correct but I was stuck at this question only so I thought to contact you…
Well if you say that revision KIT is enough then I’m satisfied and yes I also watched your lectures in fact at the end of each chapter I usually attempt opentuition online test containing 5 questions and by the grace of JESUS and with the help of your lecture I got everything obvious & I’m thankful for the blessings given in the form of lectures!$250000 x 8% x 3/12 = $5000
$750000 x 8% = $60000
$500000 x 7% x 3/12 = $8750
Total =$73750Actually this was the answer but I still didn’t got through it!
We want the interest expense for the year 1 July X2 to 30 June X3.
For the 8% loan notes, from 1 July X2 to 30 September X2 (three months) there was $1M in issue. So the interest for this period is $1M x 8% x 3/12 = $20,000
On 30 Sep they repaid 250,000, and so the interest from 1 Oct X2 to 30 Jun X3 (nine months) is $750,000 x 8% x 9/23 = $45,000For the 7% loan notes. They were issued on 1 April X3, so the interest from 1 April X3 to 30 Jun X3 (3 months) is $500,000 x 7% x 3/12 = $8,750
So the total interest expense = 20.000 + 45,000 + 8,750 = $73,750.
Hope that helps 🙂
SIRRR, It was crystal clear you pulled the pieces of puzzle in a well understandable way thank you so much for your time, I’m glad 🙂
Have a blessed Good Friday!
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