Please Solve in 20mins .A company issues 4% loan notes with a nominalvalue of $20,000,000. The loan notes are issuedat a discount of 2.5% and $534,000 of issue costsare incurred. The loan notes will be repayableat a premium of 10% after 5 years. The effectiverate of interest is 7%.Required:a. Prepare the journal entries to show the issue ofthe loan note.b. What amounts will be shown in the statement ofprofit or loss and statement of financialposition for year one?c. What amounts will be shown in the statement ofprofit or loss and statement of financialposition for year three?

Loan Notes: Loan notes or loan stocks are financial instruments that helps the issuer to raise…

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

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.

Question

Please Solve in 20mins

.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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