Ontario Ltd. (OL), a publicly accountable enterprise, issued debt in the current year to expand its operations
Question:
Ontario Ltd. (OL), a publicly accountable enterprise, issued debt in the current year to expand its operations into Manitoba. The debt bears interest at an annual rate of 4.5%. The debt, which is only to be repaid upon liquidation of OL, was issued at face value of $6,000,000. Which of the following statements is true regarding how OL should account for this debt?
A. The debt is a compound financial instrument and should be presented as both debt and equity on the statement of financial position.
B. The debt is presented as equity on the statement of financial position because it has no due date.
C. The debt is initially measured at its face value.
D. The debt is initially measured at the present value of the perpetuity of interest payments.
Financial Reporting Financial Statement Analysis and Valuation a strategic perspective
ISBN: 978-1337614689
9th edition
Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw