Page 454 - Microsoft Word - 00 CIMA F1 Prelims STUDENT 2018.docx

F2: Advanced Financial Reporting

3.4 On 1st January 20X5, ES Ltd issued $4m 5% debentures. The debentures have
been issued with a 2.5% discount. Issue costs totalled $200k. The debentures
are redeemable on 31st December 20X7 with a $100k premium.

The effective interest rate is 8.71%.

What amount will be held on the SOFP for ES’s debentures as at the
31st December 20X6?

Give your answer to the nearest $000.

3.5 EF issued 20,000 3% $100 convertible bonds on 1 January 20X3. The bonds
are either repayable at par after four years or can be converted into 20 equity
shares per bond. The market interest rate for similar bonds without the
conversion option is 7%.

What is the finance cost that would be recognised in the statement of
profit or loss in the year ended 31 December 20X3 in relation to the
convertible bonds?

A $nil

B $60,000

C $121,045

D $140,000

446