Question: A company issues 0% loan notes at their nominal value of RM40,000. The loan notes are repayable at a premium of RM11,800 after 3 years.

A company issues 0% loan notes at their nominal value of RM40,000. The loan notes are repayable at a premium of RM11,800 after 3 years. The effective rate of interest is 9%.

Required:

1. What amount will be recorded as a financial liability when the loan notes are issued?

2. What amounts will be shown in the income statement and Statement of Financial Position for Year 1 until Year 3?

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