Entity A invested $12,000 in 10% loan notes. The loan interest is paid in arrears.
The loan notes are repayable at a premium after 3 years. The effective rate of interest is 12%.
Entity A intends to collect the contractual cash flows which consist solely of repayments of interest and principal.
REQUIRED:
(1) Measure the interest revenue which recognized in the Statement of Profit or Loss of year 3.
(2) Measure the loan notes which recognized in the Statement of Financial Position of year 2.
Ans. Calculation of Net Interest Income and balance at end of each year.
Particulars | Year1 | Year2 | Year3 |
Opening Balance (A) | 12000 | 12240 | 12509 |
Add:Interest Income p.a @ 12% of A | 1440 | 1469 | 1501 |
Less:Interest Receivable (12000*10%) | (1200) | (1200) | (1200) |
Less:Redemption value | - | - | N.A |
Closing Balance | 12240 | 12509 | N.A |
1. Interest revenue recognised in profit n loss of 3rd year= 1501
2. Loan notes recognized in the Statement of Financial Position of year 2=12509
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