1 Test your understanding 8 On 1 January 20X0 Dunston Co issued $20 million of convertible loan stock, redeemable in three years' time for $22 million or convertible into 500,000 ordinary S1 shares. Dunston Co's treasury department has calculated that the present value of the cash flows, discounted at the interest rate on similar debt without the conversion option is $19,001,600. What amounts should be shown in the statement of financial position for the debt at the date of issue? A Debt element $19,001,600 and equity element $998,400 B Debt element $998,400 and equity element $19,001,600 Debt element $20,000,000 and equity element $500,000 D Debt element $22,000,000 and equity elemento 2 An entity acquires a 6% $1,000 bond, a financial asset, for $970 at the beginning of Year 1. Interest is receivable annually in arrears. The bond is redeemable at the end of Year 3 at a premium of 3%. The financial asset is measured at amortised cost. The effective interest rate of the financial instrument has been calculated at 8.1%. Calculate the closing statement of financial position figure at the end of Year 2. Work to the nearest $. $ 3 On 1 January 20X0, Aditi Co issued $30 million 5% convertible loan stock at par. This is redeemable at $30 million in three years' time or convertible into 1,000,000 ordinary $1 shares at the option of the holder. The effective interest rate on a similar bond without the conversion option is 7%. What amount should be shown as a liability (to the nearest thousand) on the statement of financial position for the convertible loan stock at the date of issue? '000. SEN