Page 387 - Microsoft Word - 00 CIMA F1 Prelims STUDENT 2018.docx

Answers

Example 3.2

Amortised cost table

Year Opening Effective interest Coupon paid Closing
balance 9% (P/L) 3% balance (SFP)

$ $ $ $
1 478,000 (W1) 43,020 (16,200) 504,820

2 504,820 45,434 (16,200) 534,054
3 534,054 48,065 (16,200) 565,919

–––––––
136,519

–––––––
Note: Effective interest rate is multiplied by opening balance.

Note: Coupon rate is multiplied by par value of debt (3% × 540,000).

(W1) Opening balance = Fair value – transaction costs (Net proceeds)

$
Nominal value 540,000

Discount 10% (54,000)
Issue costs (8,000)

–––––––
478,000

–––––––

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