Question

Butter Co issues £ 50m 6% preference shares at par on 1/1 / 20X0. The shares...

Butter Co issues £ 50m 6% preference shares at par on 1/1 / 20X0. The shares carry a contractual obligation to be redeemed at a 10% premium in 5 years time. According to IFRS Standards how should the shares be initially recognized in the financial statements on 1/20 / 20X0?

1/ As a financial liability of £ 55m

2/As a financial liability of £ 50m

3/As an equity instrument of £ 55m

4/As an equity instrument of £ 50m
Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

The answer is 2. a Financial liability of £50m.

Explanation: As per IFRS standards the principle to classify a instrument as Financial laibility it must contain contractual obligation to deliver cash or financial asset to the holder of instrument , in the given case the shares carry contractual obligation for redemption at 10% premium. So the preference shares issued are recorded as Financial liability and recoreded at face value and at the time of maturity , the difference is recorded as premium paid.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Cumnor Hill Ltd issues 1 million redeemable preference shares of $2.00 each on 1st July 2019....
Cumnor Hill Ltd issues 1 million redeemable preference shares of $2.00 each on 1st July 2019. The shares offer a rate of return of 7 per cent per annum. The shares are redeemed at the option of the shareholders on 30th June 2021. Required: a) Would you classify these preference shares as debt or as equity? Why? b) Provide the journal entries to account for the issue and subsequent redemption of the shares, assuming that the issue was by a...
Question 1. A Co has publicly traded shares and reports profit after tax of $100 million...
Question 1. A Co has publicly traded shares and reports profit after tax of $100 million for the year ended 31 December 20X0. On 1 January 20X0, the entity had 200 million ordinary shares in issue and $80 million 6% irredeemable preference shares. The preference dividends are payable on 31 December each year. In accordance with IAS 33 Earnings per Share (EPS), what is the EPS for the year ended 31 December 20X0? 34.0 cents 35.7 cents 47.6 cents 50.0...
Quatro Co. issues bonds dated January 1, 2018, with a par value of $730,000. The bonds’...
Quatro Co. issues bonds dated January 1, 2018, with a par value of $730,000. The bonds’ annual contract rate is 12%, and interest is paid semiannually on June 30 and December 31. The bonds mature in three years. The annual market rate at the date of issuance is 10%, and the bonds are sold for $767,042. 1. What is the amount of the premium on these bonds at issuance? 2. How much total bond interest expense will be recognized over...
Quatro Co. issues bonds dated January 1, 2017, with a par value of $820,000. The bonds’...
Quatro Co. issues bonds dated January 1, 2017, with a par value of $820,000. The bonds’ annual contract rate is 10%, and interest is paid semiannually on June 30 and December 31. The bonds mature in three years. The annual market rate at the date of issuance is 8%, and the bonds are sold for $862,972. 1. What is the amount of the premium on these bonds at issuance? 2. How much total bond interest expense will be recognized over...
Quatro Co. issues bonds dated January 1, 2019, with a par value of $860,000. The bonds’...
Quatro Co. issues bonds dated January 1, 2019, with a par value of $860,000. The bonds’ annual contract rate is 10%, and interest is paid semiannually on June 30 and December 31. The bonds mature in three years. The annual market rate at the date of issuance is 8%, and the bonds are sold for $905,068. 1. What is the amount of the premium on these bonds at issuance? 2. How much total bond interest expense will be recognized over...
Quatro Co. issues bonds dated January 1, 2019, with a par value of $400,000. The bonds’...
Quatro Co. issues bonds dated January 1, 2019, with a par value of $400,000. The bonds’ annual contract rate is 13%, and interest is paid semiannually on June 30 and December 31. The bonds mature in three years. The annual market rate at the date of issuance is 12%, and the bonds are sold for $409,850. 1. What is the amount of the premium on these bonds at issuance? 2. How much total bond interest expense will be recognized over...
Quatro Co. issues bonds dated January 1, 2017, with a par value of $830,000. The bonds’...
Quatro Co. issues bonds dated January 1, 2017, with a par value of $830,000. The bonds’ annual contract rate is 9%, and interest is paid semiannually on June 30 and December 31. The bonds mature in three years. The annual market rate at the date of issuance is 8%, and the bonds are sold for $851,741.    1. What is the amount of the premium on these bonds at issuance? 2. How much total bond interest expense will be recognized...
Quatro Co. issues bonds dated January 1, 2019, with a par value of $830,000. The bonds’...
Quatro Co. issues bonds dated January 1, 2019, with a par value of $830,000. The bonds’ annual contract rate is 9%, and interest is paid semiannually on June 30 and December 31. The bonds mature in three years. The annual market rate at the date of issuance is 8%, and the bonds are sold for $851,741. 1. What is the amount of the premium on these bonds at issuance? 2. How much total bond interest expense will be recognized over...
Question 7 Abu Ltd had 100,000 shares in issue, but then makes a 1 for 5...
Question 7 Abu Ltd had 100,000 shares in issue, but then makes a 1 for 5 rights issue on 1 October 2017 at a price of GH¢1. The market value on the last day of quotation with rights was GH¢1.60. Total earnings are GH¢50,000 in 2017 and GH¢40,000 in 2016. Required: Calculate the Earnings per share for the year ended 31 December 2017 and the corresponding figure for 2016 in accordance with IAS 33: Earnings per share Question 5 Adom...
1. Del Rio Demolition Co. has 16 million shares of common stock with a par of...
1. Del Rio Demolition Co. has 16 million shares of common stock with a par of $1.50 with a current stock price of $87. The company has 2 bond issues – one issue of 60,000 bonds with a 6.7% interest rate and a current price quote of 96.25. The second issue of 75,000 bonds has a 5.1% interest rate and a current quote of 88.95. The cost of equity is 13.7% while the cost of debt is 5.9%. A. Calculate...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT