Maurice Tutor

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    Argosy University/ Phoniex University/
    Nov-2005 - Oct-2011

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    Phoniex University
    Oct-2001 - Nov-2016

Category > Accounting Posted 27 Sep 2017 My Price 9.00

Financial assets and liabilities

18 Financial assets and liabilities

 

 

On 1 January 2005, an entity issued a debt instrument with a coupon rate of 3.5% at a par value of

 

$6,000,000. The directly attributable costs of issue were $120,000. The debt instrument is repayable on 31 December 2011 at a premium of $1,100,000.

 

Required

 

What is the total amount of the finance cost associated with the debt instrument?

 

 

On 1 January 20X3 Deferred issued $600,000 loan notes. Issue costs were $200. The loan notes do not carry interest, but are redeemable at a premium of $152,389 on 31 December 20X4. The effective finance cost of the loan notes is 12%.

 

Required

 

What is the finance cost in respect of the loan notes for the year ended 31 December 20X4?

 

 

On 1 January 20X1, EFG issued 10,000 5% convertible bonds at their par value of $50 each. The bonds will be redeemed on 1 January 20X6. Each bond is convertible to equity shares at the option of the holder at any time during the five year period. Interest on the bond will be paid annually in arrears.

 

The prevailing market interest rate for similar debt without conversion options at the date of issue was 6%.

 

The discount factor for 6% at year 5 is 0.747.

 

The cumulative discount factor for years 1-5 at 6% is 4.212.

 

Required

At what value should the equity element of the hybrid financial instrument be recognised in the financial statements at EFG at the date of issue?

18 Financial assets and liabilities

 

On 1 January 2005, an entity issued a debt instrument with a coupon rate of 3.5% at a par value of

$6,000,000. The directly attributable costs of issue were $120,000. The debt instrument is repayable on 31 December 2011 at a premium of $1,100,000.

Required

What is the total amount of the finance cost associated with the debt instrument?        

 

On 1 January 20X3 Deferred issued $600,000 loan notes. Issue costs were $200. The loan notes do not carry interest, but are redeemable at a premium of $152,389 on 31 December 20X4. The effective finance cost of the loan notes is 12%.

Required

What is the finance cost in respect of the loan notes for the year ended 31 December 20X4?

 

On 1 January 20X1, EFG issued 10,000 5% convertible bonds at their par value of $50 each. The bonds will be redeemed on 1 January 20X6. Each bond is convertible to equity shares at the option of the holder at any time during the five year period. Interest on the bond will be paid annually in arrears.

The prevailing market interest rate for similar debt without conversion options at the date of issue was 6%.

The discount factor for 6% at year 5 is 0.747.

The cumulative discount factor for years 1-5 at 6% is 4.212.

Required

At what value should the equity element of the hybrid financial instrument be recognised in the financial statements at EFG at the date of issue?

 

Answers

Maurice Tutor
(5)
Status NEW Posted 27 Sep 2017 12:09 AM My Price 9.00

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