Page 496 - F2 Integrated Workbook STUDENT 2019

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, at that time,
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

3.6 VIC Ltd acquired 100,000 ordinary shares of Shane Co for $1,000,000 on 1
January 20X4. Brokerage fees associated with arranging the acquisition totalled
$40,000, VIC Ltd believes Shane Co has huge growth potential and intends to
hold the shares in the long term to benefit from increased dividend growth and
market capitalisation. VIC will not use the default classification of equity
financial assets if possible.

Share prices for Shane on 31 December 20X4 were $15 per share.

Which of the following statements are false? Select all that apply.

A The shares should be classified as a FVOCI financial asset

B A gain of $460,000 from revaluing the financial asset will be recorded
within the statement of profit or loss for the year ended 31 December
20X4.

C The brokerage fees create an expense of $40,000 in the statement of
profit or loss.

D Any dividend received from the investment during 20X4 will be included
within other income on the statement of profit or loss.

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