Consolidated SFP question has convertible bonds issued by the Parent.
1. Split equity/liability (fine)
2. Amortize the liability using effective interest method
- b/f liability x
- Interest x
- Payment (x)
- c/f liability x
The issue is, I thought the interest paid would CR current assets (bank) (we have paid cash) but the answer CR group retained earnings?
The only reason I can think of is the interest is due on 1 Jun 06 and the reporting date is 31 May 06, so interest not paid yet but accrued - however this would still be a CR to current assets?
Thanks in advance