Page 410 - F2 Integrated Workbook STUDENT 2019

Chapter 19

Example 3.4

This financial liability should be measured at amortised cost. The total finance
cost is equal to the total annual interest paid of $750 ($5,000 × 5% × 3 years)
plus the premium on redemption of $487, giving a total cost of $1,237. This
cost is spread over the three year period by using the given effective rate of
interest of 8%, and is best calculated by use of an amortised cost table as
shown.

Balance Interest Interest Balance
b/f @ 8 % paid on SFP

20X5 5,000 400 (250) 5,150
20X6 5,150 412 (250) 5,312
20X7 5,312 425 (250) 5,487

The interest at 8% represents the finance cost to be shown in the statement of
profit or loss each year, and the year-end balance is the balance that would be
shown on the statement of financial position.

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