Calculate the cost of the liability and equity

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Reference no: EM132735174

Eazy Ltd issued a 12% R10 000 000 convertible loan note on 1 October 2015. Interest is payable annually in arears on 30 September each year. The loan notes is redeemable at R10 000 000 on 30 September 2018 or convertible into equity shares at the option of the loan note holders on the basis of 20 equity shares for each 1 000 of loan note. An effective interest rate of 15% applies.

Required:

Problem 1: Calculate the cost of the liability and equity (if applicable) component of the convertible loan note that will be recognised at initial recognition AND provide journal entries. Round the discount factor to 2 decimal places

Reference no: EM132735174

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