Question
Vivek plc issues three debt instruments, all with a nominal value of 100,000 redeemable in TWO years. The implicit rate of interest for all the
Vivek plc issues three debt instruments, all with a nominal value of 100,000 redeemable in TWO years. The implicit rate of interest for all the financial instruments is 10%.
Required: Explain (using calculations as appropriate), how EACH of the following financial instruments should be dealt with in the financial statements, for the two years (the coupon rate refers to the rate of interest):
1. The first has a coupon rate of 0%, and the debenture is redeemed at a premium of 21,000.
2. The second has a coupon rate of 0% and the debenture is issued at a discount of 17,355.
3. The third has a coupon rate of 2%, and the debenture is issued at a discount of 5,000 and redeemed at a premium of 10,750 (12 Marks)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started