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Calculate amount at which the loan stock should be measured

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Reference no: EM132585088

On 1 January 2017, a company buys $100,000 of 6% loan stock for $93,930. Interest will be received on 31 December each year and the stock will be redeemed at par on 31 December 2021. The company intends to hold the stock until maturity and calculates the effective interest rate to be 7.5% per annum. Financial statements are prepared to 31 December each year.

Question 1: State the amount at which this stock should be measured on 1 January 2017

Question 2: Calculate the amount at which the loan stock should be measured on 31 December 2017, 2018, 2019, 2020, and 2021

Question 3: Show that the effective rate of 7.5% exactly discounts estimated future cash receipts to the initial carrying amount of the asset as required by IAS39

Reference no: EM132585088

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