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Quincy issued a $25 million 6% loan note on 1 October 20X1. Issue costs were
$1 million and these have been charged to administrative expenses. The loan will be
redeemed on 30 September 20X4 at a premium which gives an effective interest rate
on the loan of 8%.the financial liabilty is initially recognized by subtracting the issue cost from cost of disposal so where would the issue cost be recorded?
since in the solution financial statement it is subtracted from admin expense and not added anywhere should’t it be added somewhere in pnl ???
Hi,
The issue costs should not have been included within the administrative expenses. They have DR Administrative expenses CR Bank when they should have DR Loan note CR Bank.
To correct the error we need to DR Loan note CR Administrative expenses. The DR to loan notes reduces the loan notes and the CR to administrative expenses reduces the administrative expenses.
Thanks
Thanks
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