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A company issues 4% loan notes with a nominal value of $20,000,000. The loan notes are issued at a discount of 2.5% and $534,000 of issue costs are incurred. The loan notes will be repayable at a premium of 10% after 5 years. The effective

A company issues 4% loan notes with a nominal value of $20,000,000. The loan notes are issued at a discount of 2.5% and $534,000 of issue costs are incurred. The loan notes will be repayable at a premium of 10% after 5 years. The effective

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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.A company issues 4% loan notes with a nominal value of $20,000,000. The loan notes are issued at a discount of 2.5% and $534,000 of issue costs are incurred. The loan notes will be repayable at a premium of 10% after 5 years. The effective rate of interest is 7%. Required: a. Prepare the journal entries to show the issue of the loan note. b. What amounts will be shown in the statement of profit or loss and statement of financial position for year one? c. What amounts will be shown in the statement of profit or loss and statement of financial position for year three?
Transcribed Image Text:.A company issues 4% loan notes with a nominal value of $20,000,000. The loan notes are issued at a discount of 2.5% and $534,000 of issue costs are incurred. The loan notes will be repayable at a premium of 10% after 5 years. The effective rate of interest is 7%. Required: a. Prepare the journal entries to show the issue of the loan note. b. What amounts will be shown in the statement of profit or loss and statement of financial position for year one? c. What amounts will be shown in the statement of profit or loss and statement of financial position for year three?
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