On 1 April 2020, an 8% convertible loan with a nominal value of P600,000 was issued at par. It is redeemable on 31 March 2024 also at par. Alternatively it may be converted into equity shares on the basis of 100 new shares for each P200 worth of loan note. An equivalent loan note without the conversion option would have carried interest at 10%. Interest of P48,000 has already been paid and included as a finance cost. Prepare all the necessary entries related to the loan.

On 1 April 2020, an 8% convertible loan with a nominal value of P600,000 was issued at par. It is redeemable on 31 March 2024 also at par. Alternatively it may be converted into equity shares on the basis of 100 new shares for each P200 worth of loan note. An equivalent loan note without the conversion option would have carried interest at 10%. Interest of P48,000 has already been paid and included as a finance cost. Prepare all the necessary entries related to the loan.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

A 5% loan note was issued on 1st April 2020 at its face value of £40 million. Direct costs of the issue were £2,000,000. The loan note will be redeemed on 31st March 2023 at a substantial premium. The effective interest rate applicable is 10% per annum. At what amount will the loan note appear in the statement of financial position as at 31st March 2022 ? A. £39,800 B. £41, 780 C. £39,780 D. £43, 780
Gerald issued 9% K35 million convertible loan note on 1 April 2015 at par. Interest is payable in arrears on 31 March each year. The loan note is redeemable at par on 31 March 2018 or convertible into equity shares at the option of the loan note holders on the basis of 30 shares for each K100 of loan. A similar instrument without the conversion option would have interest rate of 10% per annum. The present value of K1 receivable at the end of each year based on discount rates of 10% are; end of year 10% 1 0.91 2 0.83 3 0.75 cumulative 2.49 Explain the accounting treatment of the above instrument
B) WN ltd issued a GH₵ 40 million 15% convertible loan note at a par on 1 January 2010 with interest payable annually in arrears. Three years later, on 31 December 2012, the loan note is convertible into equity shares on the basis of GH₵ 100 of loan note for 50 equity shares or it may be redeemed at par in cash at the option of the loan note holder. WN financial Accountant has observed that the use of a convertible loan note was preferable to a non-convertible loan note as the latter would have required an interest rate of 20% in order to make it attractive to investors. The Accountant has also commented that the use of a convertible loan note will improve the profit as a result of lower interest costs and, as it is likely that the loan note holders will choose the equity option, the loan note can be classified as equity which will improve the company’s high gearing position The present value of GH₵ 1 received at the end of the year, based on the discount rate of 15% and 20% can be…
On 1 January 2017, a company which prepares financial statement to 30 June each year buys € 400,000 of 5% loan notes for € 411,225. Interest will be received half-yearly on 30 June and 31 December and the loan notes will be repaid at a premium of 10% on 31 December 2020. The effective rate of interest is 3.5% per half year and the company intends to hold this investment until maturity. Calculate the amount of interest income that should be recognised in the company's financial statements for each of the years to 30 June 2017, 2018, 2019. Also calculate the amount at which the loan notes should be shown in the statement
Accounting Goodview Berhad issued RM 20 million 6% convertible loan notes on 1 January 2017. Upon maturity on 31 December 2019, the holders of the loan notes have the option to accept cash or convert the notes into ordinary shares at the term of RM 100 loan notes can be converted into 50 ordinary shares. The market interest rate for the year 2017 was 10%. Required: In accordance with MFRS 9: Financial Instruments: a) Determine the loan amount over its maturity period. b) Determine the relevant journal entries in the book of the company over the maturity period of the loan notes.
On Jan. 1, 2021, both ABC Corporation and its subsidiary Alpha Corporation would require loans of P10,000,000 due in 5 years time. ABC prefers a variable interest rate while Alpha prefers a fixed interest rate, but both are open to an interest rate swap. ABC's bank offered (a) 8% or (b) treasury bond rate plus 6%. Alpha's bank offered (a) 10% or (b) treasury bond rate plus 7%. If an interest rate swap was agreed, how much would one pay while the other receive annually with regard to this swap arrangement?
1) X Ltd issued a loan on 1st January 2015 and classified it as measured at amortised cost. Terms Norminal : GHS 50million Coupon rate : 10% Terms to maturity: 3 years Purchase price: FHS 48million Effective rate : 11.67% Required: Show the double entry for each year to maturity (ignore loss allowance) 2) A company issues GHS 10million of 6% bonds are a price of 100.50 for each GHS 100 norminal value with the issue cost of 50,000. The bonds are redeemable after four years for 10,444,000. The effective annual interest for this financial instrument is 7% Required Calculate the amortised cost of the bond and show the interest for each year to maturity
An investor is paying £467.28 monthly instalments in arrears to a lender in order to service a 5-year loan, which was taken out to finance a short term investment. Assuming a nominal annual rate of interest of 7.9% convertible monthly is applicable to this loan, calculate the initial amount of capital borrowed, the loan outstanding immediately after the 30th instalment and The amount of interest content of the 31th instalment, (NO tables, only formulas, please)
Mawuena Ltd issued 1500 convertible loan note at par on 1st January 2015. The loan notes are redeemable in four years’ time at their par value of GH¢ 200 per note. The loan note pays interest annually in arrears at an interest rate of 8%. Each loan note can be converted at the maturity date into 10 GH¢ 1 shares. The effective interest rate for four year loan notes with no right of conversion is 12% and the risk-free annual interest rate for a four-year term is 7%. Required Show how the loan note should be treated in the financial statement of Mawuena Ltd in accordance with IFRS 9 Financial Instrument
The PV of 1 at 10% for 3 periods is 0.75 and the PV of an of 1 at 14% for 3 periods is 0.67 and the PV of an ordinary P600,000. As a result of a restructuring agreement on. note payable at P6,000,000 and accrued interest payable d. The new maturiy date of the note is December 31, 2023. c. The new interest rate is 6% payable every December 31. e. The entity paid P350,000 as an arrangement fee to the The market rate of interest for similar note is 14%. The PV On January 1, 2021, Everlast Company had an overdue 10% 10% of January a a. Accrued interest of P600.000 is forgiven. b. The new principal is P4,000,000. C. The new interest rate is 6% payable every December 2, e. The entity paid P350,000 as an arrangement fee to creditor. The PV of 1 at 10% for 3 periods is 0.75 and the PV of. ordinary annuity of 1 at 10% for 3 periods is 2.49. The market rate of interest for similar note is 14%. The Du of 1 at 14% for 3 periods is 0.67 and the PV of an annuity of 1 at 14% for 3 periods is 2.32. 1.…
A firm issues 7% convertible loan notes that are redeemable in 3 years’ time at a per- note nominal value of £100. Each loan note could alternatively be converted into 25 ordinary shares in 3 years’ time. The cost of debt is 9%. Assuming that the share price in 3 years’ time is £4.50 per share, what is the current market value of a convertible loan note? a. £103.21 b. £104.59 c. £94.94 d. £110.20
A debt of P20, 000 is due on December 1, 2020. What was the value of this debt on December 1, 2018 at 14% converted semi-annually? A P33,500.39 B P15,257.90 O P36,548,19 D P 28, 600.21