Question 4

On 1 January 2015, Vivek plc issued 50,000, 100 2 per cent debentures to investors for 55 each. The debentures are redeemable at their par value of 100 in five years time, 31 December 2019. The interest rate implicit for the debenture is 15.62% per annum.

a) In accordance with IAS 39 Financial Instruments: Recognition and Measurement: Calculate the finance cost for Vivek plc in respect of the financial instrument, for each of the five years ended December 2019, and the liability of the financial instrument at the end of each of the year. (10 marks)