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John Moffat.
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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Financial Management question
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?
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.