Question 1

SECTION A

On 1 January 20X2, Apex Corp issued a 3-year bond at its par value of $1,000,000. The bond carries a coupon rate of 4% paid annually in arrears. The bond will be redeemed at a premium, resulting in an effective interest rate of 6%.

What is the carrying amount of the financial liability in Apex Corp's Statement of Financial Position as at 31 December 20X2?

Accepted Answer

Use the amortized cost table: Opening Balance + Effective Interest (Opening Balance × Effective Rate) - Cash Paid (Nominal Value × Coupon Rate) = Closing Balance.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Using the coupon rate for the interest expense, or forgetting to subtract the cash payment.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FR — Financial Reporting Practice Exam 3

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