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Financial instrument

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Financial instrument

  • This topic has 2 replies, 2 voices, and was last updated 1 year ago by P2-D2.
Viewing 3 posts - 1 through 3 (of 3 total)
  • Author
    Posts
  • July 7, 2021 at 9:58 am #627149
    kennigara
    Participant
    • Topics: 181
    • Replies: 242
    • ☆☆☆

    Example 3 (Norman) in opentuition

    Hi Dear tutor, I have some questions and I will not write the whole question here.

    Coupon interest

    4%*100$*10000=40000 per annum*4 years=160000

    Year————–B/F————Effective interest rate(5.73%)—————Cash———–C/f

    1——-980000————————-56154——————————–(40000)———-996154

    2—–996154————————–57080——————————–(40000)———1013234

    3—-1013234————————58058———————————–(40000)——-1031292

    4—-1031292———————–59093———–(40000+1050000)=1090000——-nil

    total=================230000

    Which is correct?

    Interest received each year

    Debit bank 56154
    credit interest receivable-56154

    at the end of the year double entry

    debit investment—230000
    credit interest receivable—230000

    is it correct?

    cash pay each year

    Debit interest–40000

    credit bank–40000

    at the end of the final year how can i record 1090000 as a double entry?

    debit

    credit

    July 7, 2021 at 10:14 am #627150
    kennigara
    Participant
    • Topics: 181
    • Replies: 242
    • ☆☆☆

    how do we each time record 40000 ?

    July 10, 2021 at 9:30 am #627327
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6473
    • ☆☆☆☆☆

    Hi,

    The effective interest is DR Financial instrument CR Interest income – using the effective interest and the outstanding balance.

    The cash received is DR Bank CR Financial instrument – using the coupon and par value

    Thanks

  • Author
    Posts
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