Required: Calculate the charge for doubtful debts and finance costs relating to each group of trade receivables for the period 1st January 2020 to 31st March 2020, and show the value at which these trade receivables would appear on the statement of financial position of Lushomo at 31st March 2020. [8 marks] Hannah is an entity that prepares financial statements to 31 December each year. On 1 January 2021 the entity originated two transactions in financial instruments: (i) Hannah borrowed K15 million - incurring transaction costs of K100,000 to obtain the loan. The terms of the loan are that the entity pays interest of K900,000 on 31 December each year and the loan is repayable at a substantial premium on 31 December 2024. The effective annual interest rate associated with this loan is 10%. The annual interest was paid on 31 December 2021 and Hannah intend to retain the loan until its repayment date. The fair value of the loan on 31 December 2021 was K16 million. [5 marks] (ii) Hannah made a strategic investment of K10 million in another entity, Luyando. This investment represents an equity stake of 15%. Hannah is unsure whether or not this investment will be sufficient to give Hannah significant influence over the operating and financial policies of Luyando. The investment has no fixed maturity date and Hannah has no plans to dispose of it. During the year ended 31 December 2022, Luyando made a net profit of K3 million but paid no dividends. The fair value of the investment at 31 December 2022 was K11 million. Required: Advise the directors of Hannah on how to account for the transactions above. On 1st January 2021, Nkana Plc issued 80 million K1 preferred shares at a premium of K0.5 each. Issue Costs totalled K1.5 million. The shares carry a fixed dividend of 6%. The dividend is paid annually in arrears on the 31st of December. The shares will be redeemed on 1st January 2026 at a premium of K73.6m. The effective rate of interest on these shares is 9%. Required: Show how these shares will be reported in the financial Statements of Nkana plc for the years 2021 to 2025. Nkana plc's year-end is 31st December (7 marks) During the preparation of the draft financial Statements for Lushomo for the year to 31* March 2020 the following problems have arisen: - On 1st January 2020 Lushomo entered into an agreement with Mpandamano Financial Services to factor in its trade receivables. A representative of Mpandamano Financial Services analyzed Lushomo's trade receivables into three groups; Group 1-these trade receivables would not be factoredin or administered by Mpandamano Financial Services. They will be collected in the normal way byLushomo. Group 2 - these trade receivables would be factored by Mpandamano financial services on a 'with recourse' basis. A finance charge of 1% per month on the outstanding balance at the beginning of the month will be made. The terms of the recourse are that any individual balance outstanding after 3 months would be reimbursed by Lushomo in full. Group 3-these trade receivables would be factored and collected "without recourse". Mpandamano Financial Services would pay Lushomo 95% of the book value of the trade receivables. The following analysis of the trade receivable groups and related information has been made: Group 1 Group 2 Group 3 K'000 K'000 K'000 Balance 1 January 2020 500 600 800 30% 40% 50% of 1 January balance collected in January of 1 January balance collected in February of 1 January balance collected in March 30% 30% 25% 20% 20% 22% Lushomo's policy is to make an allowance for doubtful debts of receivable balance when it becomes 3 months old. Required: Calculate the charge for doubtful debts and finance costs relating to each group of trade receivables for the period 1st January 2020 to 31st March 2020, and show the value at which these trade receivables would appear on the statement of financial position of Lushomo at 31st March 2020. [8 marks] Hannah is an entity that prepares financial statements to 31 December each year. On 1 January 2021 the entity originated two transactions in financial instruments: (i) Hannah borrowed K15 million - incurring transaction costs of K100,000 to obtain the loan. The terms of the loan are that the entity pays interest of K900,000 on 31 December each year and the loan is repayable at a substantial premium on 31 December 2024. The effective annual interest rate associated with this loan is 10%. The annual interest was paid on 31 December 2021 and Hannah intend to retain the loan until its repayment date. The fair value of the loan on 31 December 2021 was K16 million. [5 marks] (ii) Hannah made a strategic investment of K10 million in another entity, Luyando. This investment represents an equity stake of 15%. Hannah is unsure whether or not this investment will be sufficient to give Hannah significant influence over the operating and financial policies of Luyando. The investment has no fixed maturity date and Hannah has no plans to dispose of it. During the year ended 31 December 2022, Luyando made a net profit of K3 million but paid no dividends. The fair value of the investment at 31 December 2022 was K11 million. Required: Advise the directors of Hannah on how to account for the transactions above. On 1st January 2021, Nkana Plc issued 80 million K1 preferred shares at a premium of K0.5 each. Issue Costs totalled K1.5 million. The shares carry a fixed dividend of 6%. The dividend is paid annually in arrears on the 31st of December. The shares will be redeemed on 1st January 2026 at a premium of K73.6m. The effective rate of interest on these shares is 9%. Required: Show how these shares will be reported in the financial Statements of Nkana plc for the years 2021 to 2025. Nkana plc's year-end is 31st December (7 marks) During the preparation of the draft financial Statements for Lushomo for the year to 31* March 2020 the following problems have arisen: - On 1st January 2020 Lushomo entered into an agreement with Mpandamano Financial Services to factor in its trade receivables. A representative of Mpandamano Financial Services analyzed Lushomo's trade receivables into three groups; Group 1-these trade receivables would not be factoredin or administered by Mpandamano Financial Services. They will be collected in the normal way byLushomo. Group 2 - these trade receivables would be factored by Mpandamano financial services on a 'with recourse' basis. A finance charge of 1% per month on the outstanding balance at the beginning of the month will be made. The terms of the recourse are that any individual balance outstanding after 3 months would be reimbursed by Lushomo in full. Group 3-these trade receivables would be factored and collected "without recourse". Mpandamano Financial Services would pay Lushomo 95% of the book value of the trade receivables. The following analysis of the trade receivable groups and related information has been made: Group 1 Group 2 Group 3 K'000 K'000 K'000 Balance 1 January 2020 500 600 800 30% 40% 50% of 1 January balance collected in January of 1 January balance collected in February of 1 January balance collected in March 30% 30% 25% 20% 20% 22% Lushomo's policy is to make an allowance for doubtful debts of receivable balance when it becomes 3 months old