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2% redeemable shares of $309,600
maturity date 31.12.20X7
EIR = 8%
issue costs = $5,265
redeemable share cost at maturity date (end of year 3) = $360,000What will be the remaining amount at the end of year 1?
What does the printed solution say is the answer and what figure did you arrive at?
Are you not able to see why and where your answer differs from the printed solution?
b/f (A) face value (B) EIR (C) c/f
year 1 304,335 7,200 24,347 321,482
2 321,482 7,200 25,718 340,000
3 340,000 7,200 27,200 360,000If im not wrong the c/f figure will be calculated as A + (C-B), correct?
Also, what would be the journal entries for the initial recognition and year 2?Initial recognition:
Dr Cash $309,600
Cr Cash $5,265
Cr Redeemable Loan Note $304,335Dr Finance Costs loan interest $7,200
Cr Cash $7,200Dr Finance Costs $17,147 (EIR – CR)
Cr Redeemable Loan Note $17,147So the total charge to profit or loss would be $24,347
Next year:
Dr Finance Costs loan interest $7,200
Cr Cash $7,200Dr Finance Costs $18,518 (EIR – CR)
Cr Redeemable Loan Note $18,518and the total charge to profit or loss would be $25,718
OK?
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