Question 2 List four conditions that must be met before development cost is capitalized (4 marks) . The entity has intention to complete the development There is technical feasibility to complete the project The entity has resources to complete the development There is a ready market for the product that is being developed Question 3 A company issues Sh. 20,000,000 of 4% convertible loan notes at par on 1 January 2009. The loan notes are redeemable for cash or convertible into equity shares on the basis of 20 shares per Sh. 100 of debt at the option of note holder on 31st December 2011. Similar non-convertible loan notes carry interest of 9%. Discount rates are provided as follows: Year 1 23 4% 9% 0.96 0.92 0.93 0.84 0.89 0.77 Required: Show how the loan notes are to be accounted in the financial statements as at 31st December 2009 (5 marks)