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Home » Accounting Class Homework Help » Pennington Limited issued $500 million worth of convertible loan notes on January 1, 2018.

Pennington Limited issued $500 million worth of convertible loan notes on January 1, 2018.

Pennington Limited issued $500 million worth of convertible loan notes on January 1, 2018. The $500 million represents the par value of the convertible loan notes at the date of issue. The notes have a coupon rate of 4% and an effective interest rate of 12% per annum. Interests are paid annually on the convertible loan notes. The convertible loan notes are expected to mature in three years. The notes are currently not recognised on the entity’s statement of financial position, however, management is currently seeking consulting advice regarding the most appropriate method of recognising the loan notes. ……… . Required: ……. . . ve …….. a. Briefly explain how substance over form apply to the recognition of the notes [3 marks] b. Determine the carrying value of the note as at January 1, 2018. [ 5 marks ] c. Prepare the statement of financial position extract as at and for the period ended December 31, 2019 showing the effect of the loan notes. [ 10 marks ]