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Financial assets & liabilities

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Financial assets & liabilities

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by P2-D2.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • April 19, 2021 at 11:00 am #618195
    sahersk
    Participant
    • Topics: 25
    • Replies: 20
    • ☆

    The 5% loan notes were issued for $9m on 1 July 20X8. Diaz Co incurred issue costs of $0.5m associated with this, which have been expensed within finance costs. The loan note interest is payable each 30 June and the loan note is repayable at a premium, giving them an effective interest rate of 8%.
    In respect of the 5% loan notes, how much should be expensed within Diaz Co’s statement of profit or loss for the year ended 31 December 20X8?
    1. $0.68m
    2. $0.45m
    3. $0.72m
    4. $0.34m

    The answer to this question is Option 4, but I’m not getting how! Could you please help me out.

    April 21, 2021 at 9:10 pm #618448
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6486
    • ☆☆☆☆☆

    Hi,

    How are you treating the issue costs? They are net-off against the proceeds of $9m, so our starting point is $8.5m.

    You then need to be careful as the loan notes were issued on 1 July X8 and the question has a reporting date of 31 December 20X8, hence 6 months since they were issued. Any interest at 8% on the outstanding amount of $8.5m is pro-rated.

    Ignore the cash payment at 5% of the par value as that is not made until 30 June 20X9.

    Try the question again using the detail given and see if you get the right answer.

    Thanks

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