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Hello Mike
Thank you so much for your lectures and notes. I have gone all the way through them and am now doing the Mini exercises in the back.
I cannot follow this one from p214 of the notes with the answer below as well;
The company issued a $25 million 6% loan note on 1 October, 2011. Issue costs were $1 million and these have been charged to
administrative expenses. The loan will be redeemed on 30 September, 2014 at a premium which gives an effective interest rate on the
loan of 8%.
What finance charge will appear in the statement of profit or loss for the year24m @ 8% = 1.92m
24m @ 6% =1.50m
Difference 420,000
Dr Loan interest (finance charges) 420,000
Cr 6% loan account (liabilities) 420,000
Loan interest in the profit or loss account 192,000
6% loan on statement of financial position 24,420,000I realise the issue costs are deducted but 24m @6% is not £1.5m should it be £25? I started on this with the December notes but the March ones have the same figures.
Guidance please and thanks in advance.
Yes, it should read “$25 @ 6%” not $24
Also, I believe that “Loan interest in the profit or loss account 192,000” should be $1,920,000
They’re on my list of corrections already, but thanks for reminding me
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