Question 4: Chapter 1 On 1 October 20X3, Shanghai issued $10 million convertible loan notes which carry a coupon rate of 5% per annum. The loan notes are redeemable on 30 September 20X6 at par for cash or can be exchanged for equity shares. A similar loan note, without the conversion option, would have required Shanghai to pay an interest rate of 8%. (1) What is the amount that will be recognized as finance costs for the year ended 30 September 20X4. (2) What is the amount that should be shown under liabilities at 30 Sep 20X4. (3) How much would be recorded in equity in relation to the loan notes? Show your workings and round your answers to 2 decimals.
Question 4: Chapter 1 On 1 October 20X3, Shanghai issued $10 million convertible loan notes which carry a coupon rate of 5% per annum. The loan notes are redeemable on 30 September 20X6 at par for cash or can be exchanged for equity shares. A similar loan note, without the conversion option, would have required Shanghai to pay an interest rate of 8%. (1) What is the amount that will be recognized as finance costs for the year ended 30 September 20X4. (2) What is the amount that should be shown under liabilities at 30 Sep 20X4. (3) How much would be recorded in equity in relation to the loan notes? Show your workings and round your answers to 2 decimals.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question 4: Chapter 1
On 1 October 20X3, Shanghai issued $10 million convertible loan notes which carry a coupon rate of 5% per annum. The loan notes are redeemable on 30 September 20X6 at par for cash or can be exchanged for equity shares. A similar loan note, without the conversion option, would have required Shanghai to pay an interest rate of 8%.
(1) What is the amount that will be recognized as finance costs for the year ended 30 September 20X4. (2) What is the amount that should be shown under liabilities at 30 Sep 20X4.
(3) How much would be recorded in equity in relation to the loan notes?
Show your workings and round your answers to 2 decimals.
Transcribed Image Text:Question 4:
On 1 October 20X3, Shanghai issued $10 million convertible loan notes which carry a coupon rate of 5%
per annum. The loan notes are redeemable on 30 September 20X6 at par for cash or can be exchanged
for equity shares. A similar loan note, without the conversion option, would have required Shanghai to
pay an interest rate of 8%.
5%
8%
End of year
0.95
0.93
0.91
0.86
0.86
0.79
cumulative
2.72
2.58
(1) What is the amount that will be recognized as finance costs for the year ended 30 September 20X4.
(2) What is the amount that should be shown under liabilities at 30 Sep 20X4.
(3) How much would be recorded in equity in relation to the loan notes?
Show your workings and round your answers to 2 decimals.
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