On 1 January 2017, a company which prepares financial statement to 30 June each year buys € 400,000 of 5% loan notes for € 411,225. Interest will be received half-yearly on 30 June and 31 December and the loan notes will be repaid at a premium of 10% on 31 December 2020. The effective rate of interest is 3.5% per half year and the company intends to hold this investment until maturity. Calculate the amount of interest income that should be recognised in the company's financial statements for each of the years to 30 June 2017, 2018, 2019. Also calculate the amount at which the loan notes should be shown in the statement

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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On 1 January 2017, a company which prepares financial statement to 30 June each year buys € 400,000 of 5%
loan notes for € 411,225. Interest will be received half-yearly on 30 June and 31 December and the loan notes
will be repaid at a premium of 10% on 31 December 2020. The effective rate of interest is 3.5% per half year and
the company intends to hold this investment until maturity. Calculate the amount of interest income that should
be recognised in the company's financial statements for each of the years to 30 June 2017, 2018, 2019. Also
calculate the amount at which the loan notes should be shown in the statement
Transcribed Image Text:On 1 January 2017, a company which prepares financial statement to 30 June each year buys € 400,000 of 5% loan notes for € 411,225. Interest will be received half-yearly on 30 June and 31 December and the loan notes will be repaid at a premium of 10% on 31 December 2020. The effective rate of interest is 3.5% per half year and the company intends to hold this investment until maturity. Calculate the amount of interest income that should be recognised in the company's financial statements for each of the years to 30 June 2017, 2018, 2019. Also calculate the amount at which the loan notes should be shown in the statement
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