Question: A loan note with 8% interest was issued on April 2020 at its face value of P40,000,000. Direct cost of the issue was P500,000. The

A loan note with 8% interest was issued on April 2020 at its face value of P40,000,000. Direct cost of the issue was P500,000. The note will be redeemed on March 2023 at a substantial premium. The effective interest rate applicable is 12% per annum. At what amount will the loan appear in the statement of financial position as at March 31, 2021?

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1. Identify your reference point when making a decision based on an element of risk.

3. If there are reasonable alternatives, think about your decisions based on the different reference points and see if there are any contradictions in the decisions.

4. It is only at this point that you can give the problem your full attention in relation to the various ways you have framed the problem.