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FR – L2 – Q40 – Financial Reporting Standards and Their Applications

Show lease presentation for a boat lease in Finley Ltd's financial statements for 20X4, including profit or loss and financial position extracts.

Question

On 1 January 20X4, Finley Ltd entered into an agreement to lease a boat. The initial measurement of the lease liability was GH¢36,000 and the term of the lease was four years. Annual lease payments of GH¢10,000 are payable in advance. The interest rate implicit in the lease is 7.5%.

Required
Show how this lease would be presented in the statement of profit or loss of Finley Ltd for the year ended 31 December 20X4 and the statement of financial position as at that date. Detailed disclosure notes are not required.

Answer

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Tags: Depreciation, Finance Costs, Financial Statements, IFRS 16, Interest rate, Lease Accounting, Statement of Financial Position, Statement of profit or loss
Level: Level 2

Topic: Financial Reporting Standards and Their Applications

FM – L2 – Q15 – Business valuations

Estimate market value of irredeemable 7.5% bonds with 9% required return.

Question

Assume that bond investors in Ama Industries require a return of 9% per year on their investments.

Required:

(A) Estimate the market value of irredeemable 7.5% bonds that pay interest annually.

(B) Estimate the market value of bonds paying coupon interest of 6% per year annually, that are redeemable at par in four years’ time.

(C) Estimate the market value of bonds paying coupon interest of 10%, redeemable at par after three years, where interest is payable every six months.

(D) Estimate the market value of a convertible bond with a coupon of 5% and interest payable annually; these bonds are convertible after three years into equity shares at the rate of 20 shares for every GH₵100 nominal value of bonds. The expected share price in three years’ time is GH₵7.

Answer

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Tags: Bond valuation, Business valuations, Interest rate, Irredeemable bonds
Level: Level 2

Topic: Business valuations

Tag (SQ): Interest rate

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FR – L2 – Q40 – Financial Reporting Standards and Their Applications

Show lease presentation for a boat lease in Finley Ltd's financial statements for 20X4, including profit or loss and financial position extracts.

FM – L2 – Q15 – Business valuations

Estimate market value of irredeemable 7.5% bonds with 9% required return.

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Tag (SQ): Interest rate

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FR – L2 – Q40 – Financial Reporting Standards and Their Applications

Show lease presentation for a boat lease in Finley Ltd's financial statements for 20X4, including profit or loss and financial position extracts.

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FM – L2 – Q15 – Business valuations

Estimate market value of irredeemable 7.5% bonds with 9% required return.

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