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At 30 June 2002 a company has $1m 8% loan notes in issue , interest being paid half-yearly on 30 june and 31 december.
On 30th september 2002 the company redeemed $250,000 of these loan notes at par, paying interest due to that date.
On 1st April 2003 the company issued $500,000 7% loan notes , interest payable half – yearly on 31 March and 30th September. What figure should appear in the company’s statement of profit or loss for interest payable in the year ended 30 june 2003?Sir i don’t get it how to solve this question.. i have watched your videos..Please explain this question
You must have an answer to this in the same book in which you found the question. In future say what it is in the answer that you are not clear about, and then I will explain.
The year in question is 1 July 2002 to 30 June 2003.
As far as the 8% loan notes are concerned, there is interest on $1M from 1 July 2002 to 30 September 2002, so 3/12 x 8% x $1M. There is then interest on $750,000 from 1 October 3003 to 30 June 2003, so 9/12 x 8% x $750,000.
As far as the 7% loan notes are concerned, there is interest on $500,000 from 1 April 2003 to 30 June 2003, so 3/12 x 7% x $500,000.
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