Entity A invested $654,000 in 7.75% loan notes. Transaction cost is incurred as $2,500. The loan...

 

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Entity A invested $654,000 in 7.75% loan notes. Transaction cost is incurred as $2,500. The loan interest is paid in arrears. The loan notes are repayable at a premium after 3 years. The effective rate of interest is 12.25%. Entity A intends to collect the contractual cash flows which consist solely of repayments of interest and principal. REQUIRED: (1) Measure the interest revenue recognised in the Statement of Profit or Loss of year 3. (2) Measure the loan notes recognised in the Statement of Financial Position of year 2. (3) Measure the redemption value at the maturity date. ANSWERS: (1) The interest revenue = $ (2) The loan notes = $ (3) The redemption value = $ Entity A invested $654,000 in 7.75% loan notes. Transaction cost is incurred as $2,500. The loan interest is paid in arrears. The loan notes are repayable at a premium after 3 years. The effective rate of interest is 12.25%. Entity A intends to collect the contractual cash flows which consist solely of repayments of interest and principal. REQUIRED: (1) Measure the interest revenue recognised in the Statement of Profit or Loss of year 3. (2) Measure the loan notes recognised in the Statement of Financial Position of year 2. (3) Measure the redemption value at the maturity date. ANSWERS: (1) The interest revenue = $ (2) The loan notes = $ (3) The redemption value = $

Answer rating: 100% (QA)

Solution 1We need to find Interest Revenue Recognized in Year 3 Given Initial investme... View the full answer