Reference no: EM133000417

Question - a) Tourmaline Bhd purchased debentures for its fair value of RM2,100,000 in 1 January 2020. The debentures are due to mature on 31 December 2024. The principal amount of the debentures is RM2,625,000. The fixed interest of the debentures is 5.32% that is paid annually whereas, the effective rate of interest is 8%.

Required -

i. Calculate the amount of interest received in 2020 and 2021.

ii. Determine the amortised cost at the end of 2020,2021 and 2023.

b) On 1 January 2021, Zircon Bhd issued 5% loan notes with a nominal value of RM560,000. Zircon Bhd issued the loan notes at a 4% discount and the company incurred the issued costs amounting to RM4,760. The loan notes will be repayable at a premium of 9% after four years. The effective interest rate is 10%.

Required -

i. Calculate the finance costs for 2021 and 2022.

ii. Determine the amount of 5% loan note as at 31 December 2021 and 2022.

c) On 1 January 2021, Peridot Bhd issued 10,000 5% convertible bonds at their par value of RM50 each. The bonds will be redeemed on 1 January 2026. Each bond is convertible to equity shares at the option of the holder at any time during the five-year period. Interest on the bond will be paid annually in arrears. The prevailing market interest rate for similar debt without conversion options at the date of issue was 6%. The discount factor for 6% at year 5 is 0.747. The cumulative discount factor for years 1-5 at 6% is 4.212.

Required - At what value should the equity element of the hybrid financial instrument be recognised in the financial statements of Peridot Bhd at the date of issue?