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John Moffat.
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MookaClement
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I have been trying to solve this question for sometime now and looking answer isn’t making any sense either.
The loan notes are currently trading at $106 and are redeemable at par in 5 years time.
And the balance sheet extract has 12% loan notes – $1500
Am really confused on how this 1500 was converted to the market value of $1590.
Can you please help me out here?
John Moffat
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On the Statement of Financial Position (we do not call it the balance sheet) loan notes are always shown at their nominal value. As I explain in my free lectures, the nominal value of each loan note is always $100 (unless specifically told otherwise).
Therefore there are 1,500/100 = 15 loan notes, and the market value is 15 x $106 = $1,590.
I do suggest that you watch my free lectures. They are a complete free course and cover everything needed to be able to pass the exam well.
MookaClement
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