Financing

In order to finance the entire plant expansion, RFB issued $3 million of bonds on July 1, 2020. The bonds are five-year bonds with semi-annual interest payments of 3%. The current market rate was 4% at the time of issuance. Brad mentioned to Margie that they would watch interest rates and if things changed, he would be investigating the possibility of redeeming them. RFB does have the ability to redeem the bonds at any time without any penalty. At year end, Margie recorded the interest expense and payment made on December 31, 2020, for $45,000. The current yield rate for very similar bonds remains at 4% as of year end.

The balance of the financing was raised through the issuance of 10,000 cumulative preferred shares with a dividend rate of $5 per share. The preferred shares are retractable at the option of the holder at any time after 2020. Dividends were declared and paid by December 2020. The dividends were recorded through retained earnings.

Required: Prepare an analysis under IFRS:

Issues?

Handbook and Analysis?

Recommendations?