Page 1

Question

Face Value of the bond 100,000

Purchase price of the bond 100,000
Redemption Price 100,000
Transaction cost on acq 3,000
Purch price incl Tr.Cost 103,000

Term Years 4

A
Coupon rate 16%

FC
ir,
Finding Effective Rate M
Yr CF
a
az

- (100,000)
1 16,000
R

2 16,000
ed

3 16,000
4 116,000
hm
A

Effective rate 16.000%

 Page 2

Summary of Investments under IFRS 9

Ahmed Raza Mir, FCA
Amortized Cost At FV through OCI At FV through P/L

Business Model Hold to Collect Hold to Collect and Sell Hold to Sell
Cash Flows SPPI SPPI No Condition
Purchase to eliminated AM No No May Be

Categories

Debt Investment Yes Yes Yes

A
Equity Investment No Yes Yes

FC
Initial Recognition FV + Tr Cost FV + Tr Cost Only FV

ir,
Subseq Measurement Amortized Cost Fair Value
M Fair Value

Changes in FV Not Applicable OCI P/L

a
az

Realized Gains on disposal P/L OCI P/L

R

Dividend / Interest P/L P/L P/L

ed

Recycling of gains
hm

Equity Investment Not Applicable Through RE Not Applicable

Debt Investment Not Applicable Through P/L Not Applicable
A

Forex Gains

Equity Investment P/L OCI P/L

Debt Investment P/L P/L P/L
 Page 3

Question 1

Investment 4,215,150 95,000 44.37 4,215,150

Cash 4,215,150
30 Jun
OCI 522,500 95,000 39 3,692,650 522,500
Investment 522,500
17 Jul
Cash 95,000
Dividend Income 95,000
30 Sept
Investment 1,057,350 95,000 50 4,750,000 1,057,350
OCI 1,057,350
10 Nov 95,000 50 4,750,000
Cash 1,713,040 (38,000) 50 (1,900,000)
OCI 186,960 57,000 2,850,000

A
Investment 1,900,000

FC
Transfer of OCI - RE on disposal Oci gain 213,940
oci loss (186,960)
OCI 26,980 26,980

ir,
R/E 26,980
M
31 Dec
a
Investment 228,000 57,000 54 3,078,000 228,000
OCI 228,000
az

12 Jan
Cash 85,500
R

Dividend Income 85,500 68,400

31 March
ed

Investment 478,800
OCI 478,800 68,400 52 3,556,800 478,800
hm

Question 2
A

Investment 100,000
Cash 100,000
Investment 10,000
OCI 10,000
Investment 150,000
Old Invest 110,000
OCI 40,000
 Page 4

Question 3
1 May
Invetsment A 100.00
Invetsment B 153.00
Tr Cost Exp 2.00
Cash 255.00
1 Oct
Cash 21.00
Dividend Income 21.00
1 Nov
Cash 22.54
Investment A 20.00
Gain on Dispo 2.54
1 Nov

A
Cash 49.00

FC
Investment B 45.90
OCI 3.10
31 Dec

ir,
Investment A 25.00
P/L 25.00
M
31 Dec
Investment B 22.90
a
OCI 22.90
az

Extracts from SOFP

R

Investment in A 105.00
Investment in B 130.00
ed

Extracts from Statement of CI

hm

Gain on disposal 2.54

Dividend Income 21.00
Unrealised gains 25.00
A

Transaction cost (2.00)

OCI 26.00
 Page 5

Question 5

Face Value 500,000

Premium 24,000
Fair Value 524,000
Transaction cost 13,500 500k*2.7%
Purchase price 537,500
Irr given 10.0205%

Amortisation Schedule

A
Yr Op Intr Cash Closing

FC
1 537,500 53,860 (60,000) 531,360
2 531,360 53,245 (60,000) 524,605
3 524,605 52,568
ir,
(60,000) 517,173
M
4 517,173 51,823 (60,000) 508,997
a
5 508,997 51,004 (60,000) 500,001
az

Yr 0
R

Investment 537,500
ed

Cash 537,500
hm

Every Year end

A

Cash 60,000
Interest Income 53,860
Investment 6,140
 Page 6

Question 6

Face Value 500,000

Premium 24,000
Fair Value 524,000
Tr Cost 13,500
Purchase Price 537,500
Irr given 10.0205%
a b c (c-b) (c-a)
Yr Op Intrs Cash Closing CA bf FV FV OCI Chrg OCI Bal
1 537,500 53,860 (60,000) 531,360 531,360 520,000 (11,360) (11,360)
2 531,360 53,245 (60,000) 524,605 513,245 516,000 2,755 (8,605)
3 524,605 52,568 (60,000) 517,173 508,568 523,000 14,432 5,827
4 517,173 51,823 (60,000) 508,997 514,823 510,000 (4,823) 1,003
5 508,997 51,004 (60,000) 500,001 501,004 500,000 (1,004) (1)

A
Yr 0

FC
Investment 537,500
Cash 537,500
Yr 1

ir,
Cash 60,000 M
Investment 6,140
Intrst Income 53,860
Yr 1
a

OCI 11,360
az

Investment 11,360
R

Yr 1
Cash 60,000
ed

Investment 6,755
Intrst Income 53,245
hm

Yr 1
Investment 2,755
OCI 2,755
A
 Page 7

Question 7

Amortised Cost
Face Value 280,000
Premium 20,000
Transaction cost 2,000
302,000
Effective rate 7.0057%
Amortisation Schedule
Yr Op Intrst Cash Closing
1 302,000 21,157 (28,000) 295,157
2 295,157 20,678 (28,000) 287,835
3 287,835 20,165 (28,000) 280,000

At Fair Value through OCI

Face Value 280,000

A
Premium 20,000
Transaction cost 2,000

FC
302,000
Effective rate 7.0057%

ir,
Amortisation Schedule
Yr Op Intrst Cash Closing CA M FV OCI Chrg OCI Bal
1 302,000 21,157 (28,000) 295,157 295,157 299,000 3,843 3,843
2 295,157 20,678 (28,000) 287,835 291,678 283,400 (8,278) (4,435)
3 287,835 20,165 (28,000) 280,000 275,565 280,000 4,435 0
a
az

At Fair Value through P/L

R

Face Value 280,000

Premium 20,000
ed

300,000
Effective rate 7.2650% Yr 0
Effective rate 6.8240% Yr 1
hm

Effective rate 8.6800% Yr 2

Amortisation Schedule
A

Yr Op Intrst Cash Clos CA FV P/L Total Income

1 300,000 21,795 (28,000) 293,795 299,000 5,205 27,000
2 299,000 20,404 (28,000) 291,404 283,400 (8,004) 12,400
3 283,400 24,599 (28,000) 279,999 280,000 1 24,600

Alternatively

Year Interest FV gains Total

1 28,000 (1,000) 27,000
2 28,000 (15,600) 12,400
3 28,000 (3,400) 24,600
 Page 8

Question 8

At Amortised Cost

Face Value 20,000

Discount (1,000)
19,000
Effective rate 8.49%

Yr Op Intr Cash Closing

1 19,000 1,613 (1,000) 19,613
2 19,613 1,665 (1,000) 20,278
3 20,278 1,722 (1,000) 21,000

At Fair Value through OCI

Face Value 20,000

A
Discount (1,000)
19,000

FC
Effective rate 8.49%

Yr Op Intr Cash Closing CA FV OCI Chrg OCI Bal

ir,
1 19,000 1,613 (1,000) 19,613 19,613 19,400 (213) (213)
2 19,613 1,665 (1,000) 20,278 20,065M 20,400 335 122
3 20,278 1,722 (1,000) 21,000 21,122 21,000 (122) 0

At Fair Value through P/L

a
az

Face Value 20,000

Discount (1,000)
19,000
R

Effective rate 5.00%

ed

Yr Intrst FV gains
1 1,000 400
hm

2 1,000 1,000
3 1,000 600
A
 Page 9

Question 9

Amortised Cost

Yr Op Intrst Closing
1 2,100,000 265,121 2,365,121
2 2,365,121 298,591 2,663,712
3 2,663,712 336,288 3,000,000

Find the effective rate

Purchase price 2,100,000
Redemption 3,000,000
Years 3
Rate 12.625%

Yr 0
Investment 2,100,000

A
Cash 2,100,000

FC
Every year
Investment 265,121
Interest Income 265,121

At FV through OCI

ir,
M
Yr Op Intrst Closing CA FV OCI Chrg OCI Bal
1 2,100,000 265,121 2,365,121 2,365,121 2,479,339 114,218 114,218
a
2 2,365,121 298,591 2,663,712 2,777,930 2,608,696 (169,235) (55,016)
az

3 2,663,712 336,288 3,000,000 2,944,984 3,000,000 55,016 -

R

Find the effective rate FV at

Purchase price 2,100,000 Year 1 2,479,339 3million / (1+10%)^2
Redemption 3,000,000 Year 2 2,608,696 3million / (1+15%)^1
ed

Years 3
Rate 12.625%
hm

At FV Through P/L

Yr Op Intrst Closing CA FV FV gain Interst Total Income

A

1 2,100,000 265,121 2,365,121 2,365,121 2,479,339 114,218 265,121 379,339

2 2,479,339 247,934 2,727,273 2,727,273 2,608,696 (118,577) 247,934 129,357
3 2,608,696 391,304 3,000,000 3,000,000 3,000,000 - 391,304 391,304

Effective rate for every year Alternatively

Year 1 Year 2 Year 3 Only FV gains
Opening 2,100,000 2,479,339 2,608,696 Yr Opening Closing Gains
Redemption 3,000,000 3,000,000 3,000,000 1 2,100,000 2,479,339 379,339
Term 3 2 1 2 2,479,339 2,608,696 129,357
Rate 12.625% 10.000% 15.000% 3 2,608,696 3,000,000 391,304
 Page 10

Question 10

FV through OCI
Face value 800,000
discount4% (32,000)
Fair Value 768,000
tr.cost 1.5% 11,520
Initial Measurement 779,520

amount at which it will be redeemed 832,000

rn 779,520
rate 2.1956%

year opening int cash closing CA FV OCI

1 779,520 17,115 - 796,636 796,636 806,000 9,364

A
2 796,636 17,491 - 814,128 823,491 812,000 (11,491)

FC
3 814,128 17,875 - 832,006 829,875 832,000 2,125
(1)

ir,
Year 0 Investment 779,520
Cash 779,520
M
Year1 Invesment 17,115
a
Int income 17,115
az

Invesment 9,364
OCI 9,364
R

FV through p/l
ed

Face value 800,000

hm

discount4% (32,000) y1 rate 2.7040%

Fair Value 768,000 y2 rate 1.6001%
tr.cost 1.5% 11,520 y3 rate 2.4631%
A

redemeable 832,000

year opening int cash closing FV

1 768,000 20,767 - 788,767 806,000
2 806,000 12,897 - 818,897 812,000
3 812,000 20,000 - 832,000 832,000
 Page 11

Question 11

At Amortised Cost
Shares can not be classified as at Amortised Cost

At Fair Value thorugh OCI

Year 0
Investment 20,300 2+.03

A
Cash 20,300

FC
Year 1
Investment 1,500

ir,
OCI 1,500
M
FV 21,800 2.18*10000
CA (20,300)
a

1,500
az
R

At FV through P/L
ed

Investment 19,800 2+.03

Tr Cost Exp 500
hm

Cash 20,300
Year 1
A

Investment 2,000
P/L 2,000
FV 21,800 2.18*10000
CA (19,800)
2,000
 Page 12

Question12

At FV through OCI

Investment 50,500 2*1.01*50,000

Cash 50,500

at year end Fair Value 56,250 25000*2.25

Investment 5,750 CA (50,500)
OCI 5,750 5,750

A
FC
ir,
M
a
az
R
ed
hm
A
 Page 13

Question 13

Finding the effective rate (though given in the question)

Issued at 10,000
Redemption 11,449
Term 2 Years
Rate 7.000%

Year 0
Cash 10,000
Fin Liab 10,000

A
Year 1

FC
Interest Exp 700
Fin Liab 700

ir,
Year 2 M
Interest Exp 749
Fin Liab 749
a
Year 2
az

Fin Liab 11,449

Cash 11,449
R
ed
hm
A
 Page 14

Question 14

Face Value 20,000 Yr Op Intr Cash Clos

Discount (2,000) 1 17,000 2,040 (1,200) 17,840
cash Collected 18,000 2 17,840 2,141 (1,200) 18,781
Tr Cost (1,000) 3 18,781 2,254 (1,200) 19,834
Net Cash 17,000 4 19,834 2,380 (1,200) 21,015
Effective rate 12%

Year 0
Cash 17,000
Fin Liab 17,000

A
FC
ir,
M
a
az
R
ed
hm
A
 Page 15

Question 15

Year 0
Cash 30,000
Fin Liab 30,000
Year 1
Interest Exp 1,500
Cash 1,500

A
FV at Year 1

FC
Yr CF PV @6%

ir,
1 1,500 1,415
2 31,500 28,035
M
29,450
a
az

Fin Liab 550

R

P/L 550
ed
hm
A
 Page 16

Question 16

Face Value 10,000,000 - (9,700,000)

Issue cost (300,000) 1 600,000
Net Collection 9,700,000 2 600,000
Effective rate 10.226% 3 11,600,000
Coupon rate 6.000% 10.2257%

Year 0
Cash 9,700,000
Fin Liab 9,700,000
Year 1
Interest Exp 991,922
Fin Liab 391,922
Cash 600,000

A
Question17

FC
the decrease in FV due to decline in Coatmin's creditwortheness will be booked in OCI

Financial Liability 5,000,000

ir,
OCI 5,000,000
M
a
az
R
ed
hm
A
 Page 17

Question 18

1 Jan 2006 FV at year 1 (31 Dec 2006)

Cash 200,000 Yr CF PV PV (Mkt)
Fin Liability 200,000 1 14,000 13,023 13,054
31 Dec 2006 2 14,000 12,115 12,171
Interest Expe 14,000 3 14,000 11,269 11,348
Cash 14,000 4 214,000 160,243 161,743
31 Dec 2006 196,651 198,316
Fin Liab 3,349
P/L 1,684 Change due to Mkt 1,684
OCI 1,665 Change due to Credit risk 1,665
Total Change in FV 3,349

A
FC
ir,
M
a
az
R
ed
hm
A
 Page 18

Question 19

1 Jan 2010 FV at year 1 (31 Dec 2010)

Cash 5,000,000 Yr CF Fair Value @ 11% Holding CS constant
Fin Liability 5,000,000 1 600,000 540,541 545,455
31 Dec 2010 2 5,600,000 4,545,086 4,628,099
Interest Expe 600,000 5,085,626 5,173,554
Cash 600,000
31 Dec 2010 Change due to Mkt (173,554)
P/L 173,554 Change due to Credit risk 87,928
Financial Liab 173,554 Total Change in FV (85,626)
Finan Liab 87,928
OCI 87,928

A
FC
ir,
M
a
az
R
ed
hm
A
 Page 19

Question 20

1 Jan 2010 FV at year 1 (31 Dec 2010)

Cash 4,000,000 Yr CF Fair Value @ 7.5% Fair Value @ 8% holding CS constant
Fin Liability 4,000,000 1 360,000 334,884 333,333
31 Dec 2010 2 4,360,000 3,772,850 3,737,997
Interest Expe 360,000 4,107,734 4,071,331
Cash 360,000
31 Dec 2010 Change due to Mkt (71,331)
P/L 71,331 Change due to Credit risk (36,403)
Fin Liability 71,331 Total Change in FV (107,734)
OCI 36,403
Fin Liability 36,403

A
FC
ir,
M
a
az
R
ed
hm
A
 Page 20

@ 8% holding CS constant

A
FC
ir,
M
a
az
R
ed
hm
A
 Page 21

Question21

1 Jan 2010
Inventory 1,000,000
Payable 1,000,000

31 Mar 2010
Exch Loss 25,000
Payable 25,000

24 April 2010

A
Exch Loss 37,500

FC
Payable 1,025,000
Cash 1,062,500

ir,
16 May 2010 M
Acc Rece 1,737,200
Sales 1,737,200
a
az

30 June 2010
Account Rece 40,400
R

Exchg Gain 40,400

ed

20 Aug 2010
hm

Cash 1,838,200
Account Rece 1,777,600
A

Exch Gain 60,600

 Page 22

Question 22
White Cliffs Co.

30 Sept Inventory 64,000

Payable 64,000

30 Nov Foreign exchange loss 8,000

Payable 8,000

A
Payable 36,000
Cash 36,000

FC
30 Dec Foreign exchange loss 2,000

ir,
Payable
M 2,000

31 Jan Payable 1,000

a

Foreign exchange gain 1,000

az
R

Payable 37,000
Cash 37,000
ed
hm
A
 Page 23

Question23

1 Jan 2010
Inventory 480,000
Payable 480,000

28 Feb 2010
Exchg Loss 36,000
Payable 480,000
Cash 516,000

A
Carrying Amount 480,000

FC
Case 1

ir,
NRV in Local Currency M
NRV 460,000
CA (480,000)
a

Impairment Loss (20,000)

az
R

Case 2
ed

NRV in FC
NRV 480,600
hm

CA (480,000)
No Impairment
A
 Page 24

Question24

1 Jul 2010
Inventory 200,000
Payable 200,000

31 Aug 2010
Payable 200,000
Cash 200,000

Carrying Amount 200,000

A
FC
Case 1
NRV in Local Currency

ir,
NRV 205,000
CA (200,000)
M
Impairment Loss -
a
No Impairment Loss
az

Case 2
R

NRV in FC
ed

NRV 196,000
CA (200,000)
hm

Impairment Loss (P/L) (4,000)

A
 Page 25

Question25

1 April 2012
PPE 3,500,000
Cash 3,500,000

31 Dec 2012
Depr Expense 525,000
Allowance 525,000

31 Dec 2013

A
FC
Depr Expense 700,000
Allowance 700,000

ir,
Carrying Amount M 2,275,000

Case 1 RA in Local Currency

a

Carrying Amount 2,275,000

az

Recoverable Amount (2,050,000)

R

Impairment Loss 225,000

ed

Case 2 RA in FC
hm

Carrying Amount 2,275,000

Recoverable Amount (2,318,000)
A

Impairment Loss -
 Page 26

Question 26

1 Jan 2013
PPE 5,000,000
Cash 5,000,000

31 Dec 2013
Depr Expense 500,000
Allowance 500,000

A
31 Dec 2014

FC
Depr Expense 500,000
Allowance 500,000

ir,
M
Carrying Amount 4,000,000
a
az

Case 1 RA in Local Currency

Carrying Amount 4,000,000
R

Recoverable Amount (3,800,000)

ed

Impairment Loss 200,000

hm

Case 2 RA in FC
Carrying Amount 4,000,000
A

Recoverable Amount (4,140,000)

Impairment Loss -
 Page 27

Question 27

1 Jan
Advance 3,125,000 25,000*125
Cash 3,125,000

31 May
PPE 24,885,000
Advance 3,125,000 25,000*125
Cash 17,920,000 140,000*128
Payable 3,840,000 30,000*128

31 May
PPE 680,000 560k+120k

A
Cash 680,000

FC
30 June
Exc Loss 90,000 30k*131-30k*128

ir,
Payable 90,000 M
31 July
Exc Loss 45,000
a

Payable 45,000 30k*132.5-30k*131

az

Payable 3,975,000 30k*132.5

R

Cash 3,975,000
ed

31 Dec
Depr 2,109,583
hm

Allowance 2,109,583
A

Cost 24,885,000
Resdiual Value (250,000)
Depr Cost 24,635,000
Life 6
Annual Depr 4,105,833
6 months depr 2,052,917
 Page 28

Question 28

1 July 16
Advance 1,210,000
Cash 1,210,000

30 Sept
PPE 6,090,000
Advance 1,210,000

A
FC
Cash 3,050,000
Payable 1,830,000

ir,
31 Dec
M
Excg Loss 6,000
a
az

Payable 6,000
R

31 Jan
ed

Payable 1,836,000
hm

Exch Loss 9,000

Cash 1,845,000
A
 Page 29

Question 29
Kangroo Limited Summer 2018 Q3 (i)

Payments

1 May 260,000
1 Jul 1,820,000
1 Aug 520,000
2,600,000

1 May
Advance 26,000,000
Cash 26,000,000

A
FC
1 Jul
PPE 271,700,000
Advance 26,000,000

ir,
Cash 191,100,000
Payable 54,600,000 M
1 Aug
a
Payable 54,600,000
az

Exch Loss 1,560,000

Cash 56,160,000
R

1 Sep
ed

Cash 26,400,000
Advanced Rent 26,400,000
hm

31 Dec
Advance Rent 8,800,000
A

Rent Income 8,800,000

CA 271,700,000
USD 2,600,000 2,500,000
Per USD 104.50 116

FV loss 11,600,000
Exch Gain (29,900,000)
(18,300,000)

31 Dec
P/L 18,300,000
Investment Prop 18,300,000
 Page 30

Question 30

21 May 2014
Account Rece 120,000
Sales 120,000

PPE 1,250,000
Payable 1,250,000

12 June 2014
Cash 106,667

A
Exchange Loss 13,333

FC
Account Rece 120,000

ir,
30 June 2014 (Year end)
Depriciation 41,667
M
Allowance 41,667
a
az

30 June 2014 (Year end)

Exchange Loss 178,571
R

Account Payable 178,571

ed

31 July (next year)

hm

Account Payable 1,428,571

Exchange Gain 178,571
A

Cash 1,250,000

30 June (next year)

Depriciation 250,000
Allowance 250,000

Profit and Loss Account

2015 2014
Depriciation 250,000 41,667
Exchg (Gain) /Loss (178,571) 191,905
 Page 31

Question 31

Step 1 Make an amortisation schedule in FC

Yr Op Interest Cash Closing

1 100,000 7,931 (25,000) 82,931
2 82,931 6,577 (25,000) 64,508
3 64,508 5,116 (25,000) 44,624
4 44,624 3,539 (25,000) 23,163
5 23,163 1,837 (25,000) (0)

Step 2 Movement in LC
Year 1 Year 2

A
Opening Balance 800,000 704,912

FC
Inter (Avg rate) 65,033 50,643
Cash (CL Rate) (212,500) (187,500)
652,533 568,055

ir,
Closn Loan 704,912 483,809 M
Exch Loss / (Gain) 52,379 (84,246)
a
az

1 Jan 2004
Cash 800,000
R

Loan Payable 800,000

ed

31 Dec 2004
Interest Expense 65,033
hm

Loan Payable 65,033

Loan Payable 212,500
Cash 212,500
A

Exchange Loss 52,379

Loan Payable 52,379

31 Dec 2005
Interest Expense 50,643
Loan Payable 50,643
Loan Payable 187,500
Cash 187,500
Loan Payable 84,246
Exch Gain 84,246
 Page 32

Question 32

Step 1 Make an amortisation schedule in FC

Yr Op Interest Cash Closing

1 10,000 771 (3,000) 7,771
2 7,771 599 (3,000) 5,371
3 5,371 414 (3,000) 2,785
4 2,785 215 (3,000) 0

Step 2 Movement in LC
Year 1 Year 2

A
Opening Balance 70,000 58,286
Inter (Avg rate) 5,631 4,017

FC
Cash (CL Rate) (22,500) (20,100)
53,131 42,202
Closn Loan 58,286 32,225

ir,
Exch Gain / (Loss) 5,154 (9,977) M
a
1 Jan 2004
az

Loan Receivable 70,000

Cash 70,000
R

31 Dec 2004
ed

Loan Receivable 5,631

Interest Income 5,631
hm

Cash 22,500
Loan Receivable 22,500
Loan Receivable 5,154
A

Exchange Gain 5,154

31 Dec 2005
Loan Receivable 4,017
Interest Income 4,017
Cash 20,100
Loan Receivable 20,100
Exchange Loss 9,977
Loan Receivable 9,977
 Page 33

Question 33
Cost 200,000 @1.30
1 june 2004 Land 260,000
Cash 260,000

31 dec 2004 FV 250,000 @ 1

Land 50,000
R/S 50,000

FC loss 60,000

A
Land 60,000

FC
31 Dec 2005 FV 260,000 @ 1.20

ir,
Land
M
12,000
R/S 12,000
a

Land 50,000
az

FC gain 50,000
R
ed
hm
A
 Page 34

Question 34

Fair values and Exchange rates

FV Exchg Rate
1 Jan 2010 16,000 80.00
30 Jun 2010 21,000 84.00
31 Dec 2010 24,500 92.00

Journal Entries

1 Jan 2010

A
FC
Investment 1,280,000
Cash 1,280,000

ir,
30 June 2010 M
Investment 420,000
Unrealsd Gain (OCI) 420,000
a
az

Investment 64,000
Exchange Gain (OCI) 64,000
R
ed

31 Dec 2010
Investment 322,000
hm

Unrealsd Gain (OCI) 322,000

Investment 168,000
A

Exchange Gain (OCI) 168,000

Investment Value 2,254,000

Investment Value 2,254,000 24,500*92
 Page 35

Question 35

1 Jan 2001 Working

PPE 1,200,000 Yr 0 Cost 100,000
Cash 1,200,000 Depr (20,000)
Yr 1 CA 80,000
31 Dec 2001 Depr (20,000)
Depriciation 240,000 Yr 2 CA 60,000
Allowance 240,000
31 Dec 2002 Revaluation
Depriciation 240,000 USD Rate
Allowance 240,000 60,000 12
110,000 10

A
31 Dec 2002

FC
Revaluation (M2M)
PPE 500,000
Revaluation Surplus 500,000

Exchange Loss
ir,
M
Revaluation Surplus 120,000
PPE 120,000
a
az
R
ed
hm
A
 Page 36

Question 36

1 Jan 20X5
Inv 263,158
500k/1.90 Cash 263,158
500k/1.8 277,778
31 Dec 20X5 working
opening 500000/1.90 263,158
FV loss (11,111)
FC gain 14,620 3,509
closing 480000/1.80 266,667

500k/1.8 277,778 Investment 3,509

A
480k/1.8 266,667 OCI gain 3,509

FC
31 Dec 20X6
opening 266,667

ir,
FV loss (18,750)
FC gain 33,333
M
closing 281,250
Investment closing
a

FV FC 281,250
az

300,000 266,667
R

281,250 300,000
ed
hm
A
 Page 37

Question 37

30 Sept 2004
Investments 10,000,000
Cash 10,000,000

31 December
Investments 3,666,667
FV gain OCI 3,666,667

A
FC loss OCI 1,666,667

FC
Investments 1,666,667

ir,
8,333,333 M
a
az
R
ed
hm
A
 Page 38

Question 38
USD Pkr/USD
Trade Date 25,000 95
Reporting Date 26,500 104
Settlement Date 27,200 106
Trade date Accounting Settlement Date Accounting
Trade Date Trade Date
Investment 2,375,000 No Entry
Payable 2,375,000

Reporting Date Reporting Date

Investment 225,000
Exchng Gain 225,000
Investment 156,000 Receivable 156,000
FV Gain 156,000 FV Gain 156,000
Exchange Loss 225,000

A
Payable 225,000

FC
Settlement Date Settlement Date
Investment 53,000 Receivable 3,000
Exchng Gain 53,000 Exchng Gain 3,000

ir,
Investment 74,200 Receivable 74,200
FV Gain 74,200 FV Gain 74,200
M
Exchange Loss 50,000
Payable 50,000
a
Payable 2,650,000 Investment 2,883,200
az

Cash 2,650,000 Cash 2,650,000

Receivables 233,200
R
ed
hm
A
 Page 39

Question 39

Trade Date Accounting Settlement Date Accounting

14 Feb 14 Feb
Investment 2,400,000 Investment 2,400,000
Cash 2,400,000 Cash 2,400,000
28 March 28 March
Investment 140,000 Investment 140,000
FV Gain 140,000 FV Gain 140,000
Investment 400,000 Investment 400,000
Exch Gain 400,000 Exch Gain 400,000
Receivables 2,940,000
Investment 2,940,000
31 March 31 March.. Very Important entry
Receivables 210,000 Investment 210,000 (42000*5)
Exch Gain - P/L 210,000 Exch Gain 210,000

A
2 April 2 April

FC
Receivables 126,000 Investment 126,000
Exch Gain - P/L 126,000 Exch Gain 126,000
Cash 3,276,000 Cash 3,276,000
Receivables 3,276,000 Investment 3,276,000

ir,
M
a
az
R
ed
hm
A
 Page 40

Question 40

Trade date accounting

27 Dec' Invest 1,000

Payable to broker 1,000
31 Dec' Invest 5
P/L 5
05 Jan' Invest 2
P/L 2
Payable to broker 1,000

A
cash 1,000

FC
Settlement date accounting

ir,
27 Dec' no entry M
31 dec " Other Rec/FA 5
a
P/L 5
az

Irrespective of the method of Acc

the gain of current period will be recorded in current accounting
R
ed

05 Jan' Inv 1,007

cash 1,000
hm

Rec 5
p/l 2
A
 Page 41

Question 41

Trade date accounting Settlement date accounting

1 jan ' Investment 1,000 1 jan ' Investment 1,000
cash 1,000 cash 1,000

27 dec' Other Rec/FA 1,100 27 Dec' no entry

Investment 1,000
OCI 100 31 dec' Other FA/Rec 100
OCI 100

5 jan' Cash 1,100 5 jan' Cash 1,100

Other Rec/FA 1,100 Other FA/Rec 100
Inv 1,000

A
FC
ir,
M
a
az
R
ed
hm
A
 Page 42

Question 42 - Winter 2011 Q2

USD Pkr/USD
Trade Date 20,000 24.00
Reporting Date 21,000 23.50
Settlement Date 21,500 25.00

Part1 Acquisition
Trade Date Accounting Settlement Date Accounting
Trade Date Trade Date
Investment 480,000 No Entry
Payable 480,000

Reporting Date Reporting Date

Exchange Loss - P/L 10,000
Investment 10,000

A
Investment 23,500 Receivable 23,500
FV Gain - P/L 23,500 FV Gain 23,500

FC
Payable 10,000
Exch gain 10,000

ir,
Settlement Date Settlement Date
Investment 31,500 Receivable M 1,500
Exchng Gain 31,500 Exchng Gain 1,500
Investment 12,500 Receivable 12,500
FV Gain 12,500 FV Gain 12,500
a
Exchange Loss 30,000
az

Payable 30,000
Payable 500,000 Investment 537,500
R

Cash 500,000 Cash 500,000

Receivables 37,500
ed

Part2 Disposal
Trade Date Accounting Settlement Date Accounting
hm

Carrying Amount 14 Feb

Investment 809,200 Investment 809,200
Cash 809,200 Cash 809,200
A

29 Sept 28 March
Investment 23,000 Investment 23,000
FV Gain 23,000 FV Gain 23,000
Exch Loss 27,200 Exch Loss 27,200
Investment 27,200 Investment 27,200
Receivables 805,000
Investment 805,000
30 September 30 September
Receivables 17,500 Investment 17,500
Exch Gain 17,500 Exch Gain 17,500
2 Oct 2 Oct
Receivables 87,500 Investment 87,500
Exch Gain 87,500 Exch Gain 87,500
Cash 910,000 Cash 910,000
Receivables 910,000 Investment 910,000
 Page 43

Question 43
Omega Limited

Shares AED AED total Rate Amount

1 May 20,000 12.00 240,000 25.00 6,000,000
31 Dec 20,000 13.00 260,000 25.00 6,500,000
31 Mar 22,000
1 June 22,000 14.00 308,000 28 8,624,000

1 June 16,500 18.00 297,000 28 8,316,000

31 Dec 16,500 19.50 321,750 28.70 9,234,225

Investment 6,000,000

A
Cash 6,000,000 1 May

FC
Investment 500,000
OCI 500,000 31 Dec 02
Cash 795,000

ir,
Dividend Income 795,000 31 March
M
Investment 2,124,000
OCI 2,124,000 1,344,000 FV gain
a
OCI 308,000 780,000 FC gain
az

Investment 308,000 2,124,000

Investment 918,225
R

OCI 918,225
ed

9,234,225 710,325 FV
207,900 FC
hm

8,523,900 918,225
A
 Page 44

Question 44
Yr CF PV @ 15%
Face Value 500,000 1 50,000 43,478
FV o Liability (442,919) 2 50,000 37,807
Equity 57,081 3 550,000 361,634
Liability 442,919
Journal
Yr 0 Yr Op Intr Cash Closng
Cash 500,000 1 442,919 66,438 (50,000) 459,357
Liability 442,919 2 459,357 68,904 (50,000) 478,261
Equity 57,081 3 478,261 71,739 (550,000) -
Yr 1
Interst Exp 66,438
Cash 50,000
Liability 16,438
Yr 2

A
Interst Exp 68,904

FC
Cash 50,000
Liability 18,904
Yr 3

ir,
Interst Exp 71,739
Cash 50,000
Liability 21,739
M
Redemption in Cash Redemption in shares
a
Liability 500,000 Liability 500,000
az

Cash 500,000 Equity 57,081

Equity 57,081 Sh cap + Sh Prem 557,081
R

Retained Earn 57,081

ed
hm
A
 Page 45

Question 45
Yr CF PV @ 9%
Face Value 2,000,000 1 120,000 110,092
FV o Liability (1,848,122) 2 120,000 101,002
Equity 151,878 3 2,120,000 1,637,029
Liability 1,848,122
Journal
Yr 0 Yr Op Intr Cash Closng
Cash 2,000,000 1 1,848,122 166,331 (120,000) 1,894,453
Liability 1,848,122 2 1,894,453 170,501 (120,000) 1,944,954
Equity 151,878 3 1,944,954 175,046 (2,120,000) -
Yr 1
Interst Exp 166,331
Cash 120,000
Liability 46,331
Yr 2

A
Interst Exp 170,501

FC
Cash 120,000
Liability 50,501
Yr 3
Interst Exp 175,046

ir,
Cash 120,000
Liability 55,046
M
Redemption in Cash Redemption in shares
a
Liability 2,000,000 Liability 2,000,000
Cash 2,000,000 Equity 151,878
az

Equity 151,878 Sh cap + Sh Prem 2,151,878

Retained Earn 151,878
R
ed
hm
A
 Page 46

Question 46

Yr CF PV @ 25%
Face Value 7,500,000 1 1,500,000 1,200,000
FV o Liability (2,928,000) 2 1,500,000 960,000
Equity 4,572,000 3 1,500,000 768,000
Liability 2,928,000
Journal
Yr 0 Yr Op Intr Cash Closng
Cash 7,500,000 1 2,928,000 732,000 (1,500,000) 2,160,000
Liability 2,928,000 2 2,160,000 540,000 (1,500,000) 1,200,000
Equity 4,572,000 3 1,200,000 300,000 (1,500,000) -
Yr 1
Interest Expense 732,000
Liability 768,000
Cash 1,500,000

A
Yr 2

FC
Interest Expense 540,000
Liability 960,000
Cash 1,500,000
Yr 3

ir,
Interest Expense 300,000
Liability 1,200,000
M
Cash (1,500,000)
Yr 3
a
Equity 4,572,000
az

Sh Cap + Prem 4,572,000

R
ed
hm
A
 Page 47

Question 47 Liability
Yr CF PV
Proceeds 680,000 1 68,000 59,130
Liability Comp (602,370) 2 68,000 51,418
Equity 77,630 3 748,000 491,822
602,370
Allocation of Transaction cost
Value Tr Cost New Irr required
Equity 77,630 2329 Yr CF
Debt 602,370 18,071 - (584,299)
680,000 20,400 1 68,000
2 68,000
Journal 3 748,000
Yr 0 16.297%
Cash 680,000

A
Equity 77,630
Liability 602,370

FC
Yr 0
Equity 2,329
Liability 18,071

ir,
Cash 20,400

Interest
M
Yr Op Intrs Cash Cls
1 584,299 95,223 (68,000) 611,522
a
2 611,522 99,659 (68,000) 643,181
az

3 643,181 104,819 (748,000) -

R
ed
hm
A
 Page 48

Question 48 Liability
Yr CF PV @ 11%
Proceeds 200,000,000 1 16,000,000 14,414,414
Liability Comp (185,337,712) 2 16,000,000 12,985,959
Equity 14,662,288 3 216,000,000 157,937,338
185,337,712
Allocation of Transaction cost
Value Tr Cost New Irr required
Equity 14,662,288 293,246 Yr CF
Debt 185,337,712 3,706,754 - (181,630,957)
200,000,000 4,000,000 1 16,000,000
2 16,000,000
Journal 3 216,000,000
Yr 0 11.812%
Cash 200,000,000

A
Equity 14,662,288

FC
Liability 185,337,712
Yr 0
Equity 293,246
Liability 3,706,754

ir,
Cash 4,000,000
M
Interest
Yr Op Intrs Cash Cls
a
1 181,630,957 21,453,507 (16,000,000) 187,084,464
az

2 187,084,464 22,097,653 (16,000,000) 193,182,117

3 193,182,117 22,817,883 (216,000,000) -
R
ed
hm
A
 Page 49

Question 49

LIABILTY
Yr CF PV @ 9%
Proceeds 100,000,000 1 6,000,000 5,504,587
Liability Comp (92,406,116) 2 6,000,000 5,050,080
Equity 7,593,884 3 106,000,000 81,851,449
92,406,116
Allocation of Transaction cost
Value Tr Cost New Irr required
Equity 7,593,884 75,939 Yr CF
Debt 92,406,116 924,061 - (91,482,055)
100,000,000 1,000,000 1 6,000,000
2 6,000,000

A
Journal 3 106,000,000

FC
Yr 0 9.388%
Cash 100,000,000
Equity 7,593,884
Liability 92,406,116

ir,
Yr 0 M
Equity 75,939
Liability 924,061
Cash 1,000,000
a
az

Interest
Yr Op Intrs Cash Cls
R

1 91,482,055 8,588,675 (6,000,000) 94,070,730

ed

2 94,070,730 8,831,709 (6,000,000) 96,902,439

3 96,902,439 9,097,561 (106,000,000) -
hm
A
 Page 50

Question 52 Liability
Yr CF PV at 9%
Proceeds from bond 2,000,000 1 120,000 110,092
Liability Component (1,848,122) 2 120,000 101,002
Equity 151,878 3 2,120,000 1,637,029
1,848,122
Journal
Cash 2,000,000
Equity 151,878
Liability 1,848,122

1 year later
Liability CA
Opening 1,848,122

A
Interest 166,331

FC
Cash (120,000)
Carrying amount 1,894,453

ir,
Fair Value

Yr CF PV @ 7%
M
1 120,000 112,150
a
2 2,120,000 1,851,690
az

1,963,840
R

Fair Value of the bond 2,200,000

FV of liability (1,963,840)
ed

FV of equity component 236,160

hm

Bond Equity
CA 1,894,453 151,878
FV 1,963,840 236,160
A

Loss on redemption (69,386) (84,283)

Liability 1,894,453
loss 69,386
cash 1,963,840

Equity 236,160
cash 236,160
 Page 51

Question 53 Liability
Yr CF PV at 9%
Proceeds from bond 2,000,000 1 120,000 110,092
Liability Component (1,848,122) 2 120,000 101,002
Equity 151,878 3 2,120,000 1,637,029
1,848,122
Coupon rate 6%

Journal
Cash 2,000,000
Equity 151,878

A
Liability 1,848,122

FC
1 year later
Liability CA

ir,
Opening 1,848,122 M
Interest 166,331
Cash (120,000)
a
Carrying amount 1,894,453
az
R

Expense
New Shares 60,000
ed

Price 255
Expense 15,300,000
hm

Liability 1,894,453
A

Expense P/L 15,300,000

Equity 17,194,453
 Page 52

Question 56

A
FC
ir,
M
a
az
R
ed
hm
A
 Page 53

Question 57

A
FC
ir,
M
a
az
R
ed
hm
A
 Page 54

Question 58 - Winter 2017 Q4 (12 marks)

Year Cashflows PV @7% 100,000,000
1 6,000,000 5,607,477 CR 6%
2 6,000,000 5,240,632 Market rate 7%
3 6,000,000 4,897,787
4 6,000,000 4,577,371
5 56,000,000 39,927,226 Year 1
6 53,000,000 35,316,138 Opening 95,566,631
95,566,631 Interest 6,689,664
Cash (6,000,000)
Closing 96,256,296
1-Jan-15 Cash 100,000,000
Liability 95,566,631
Equity/Option 4,433,369

1-Jan-16 Repurchased 100,000 bonds (10% of total issued)

Amount 10,500,000

FV of liability - PV of Cashflows @ 8% market rate at 1 jan 2016 8%

Year Cashflows PV @8%
1 600,000 555,556
2 600,000 514,403

A
3 600,000 476,299
4 5,600,000 4,116,167

FC
5 5,300,000 3,607,091
9,269,516 92,695,163

Liability Equity total

CA 9,625,630 443,337

ir,
FV 9,269,516 1,230,484 10,500,000
tr cost 176,562 23,438 200,000

01-01-16 Liability 9,625,630

M
Gain on settlement 356,113
Cash 9,269,516
a
Equity 1,230,484
az

Cash 1,230,484

Tr cost p/l 176,562

tr cost OCI 23,438
R

Cash 200,000

Accounting for remaining 90% liability

ed

Year 2
Opening 86,630,666
Interest @ 7% 6,064,146.63
hm

Cash (5,400,000)
Closing 87,294,813

31-Dec-17 Interest Exp 6,064,147

Liability 664,147
A

Cash 5,400,000

Examiner Comments
 Page 55

Question 59 - Summer 2011 Q2(i) 6 marks

500,000 term 4 years

100 CR 12%
5,000 TFC's issued
14%
Year Cashflows PV @ 14%
1 60,000 52,632
2 60,000 46,168
3 60,000 40,498
4 560,000 331,565
470,863

1-Apr-10 Cash 500,000

A
Liability 470,863

FC
Equity 29,137

ir,
31-Mar-11 Year 1
opening 470,863 M
Interest @ 14% 65,921
Cash (60,000)
a
Closing 476,784
az

Interest Expense 65,921

R

Liability 60,000
Cash 5,921
ed
hm
A
 Page 56

Question 60 - Winter 2012 Q2(b) - 8 marks

A
FC
ir,
M
a
az
R
ed
hm

Examiner Comments
A
 Page 57

Question 61

A
FC
ir,
M
a
az
R
ed
hm
A
 Page 58

Question 62

A
FC
ir,
M
a
az
R
ed
hm
A
 Page 59

Question 63

A
FC
ir,
M
a
az
R
ed
hm
A
 Page 60

Question 64

Carrying amount 1,000

Test of significance
Yr CF PV@old IRR 10%
1 80 73
2 80 66
3 80 60
4 80 55
5 1,080 671

A
924

FC
Fee received (50)
874

ir,
Change 126
% change 12.58%
M
a
Significant change
az

Revised liability (Fair Value)

R

Yr CF PV @ mkt rate (12%)

ed

1 80 71
2 80 64
hm

3 80 57
4 80 51
A

5 1,080 613
856

Old libility 1,000

Cash 50
New liability 856
Gain 194
 Page 61

Question 65 - Jamali Limited

Face Value of the loan 2,000,000

Coupon rate 12%
Term 4 years
Effective rate 15.9504%

Yr OP Intr Cash Clos

1 2,000,000 319,007 (240,000) 2,079,007
2 2,079,007 331,609 (240,000) 2,170,616
3 2,170,616 346,221 (240,000) 2,276,837
4 2,276,837 363,163 (240,000) 2,400,000

A
At first year end

FC
Carrying amount 2,079,007
PV of revised cash flows 1,589,555
Change 489,452

ir,
Change as a % of Carrying amount
The change is significant M
PV of revised cash flows
a
Yr CF PV at 15.95035%
az

1 - -
2 - -
R

3 2,400,000 1,539,555
1,539,555
ed

Fee paid 50,000

1,589,555
hm

Revised liability (fair value)

A

Yr CF PV at Mkt Rate (14%)

1 - -
2 - -
3 2,400,000 1,619,932
1,619,932

Old Liability 2,079,007

New Liability 1,619,932
Cash 50,000
Gain on Modif 409,075
 Page 62

Question 66

Face value of the bond 900,000

Issue cost (50,000)
Net collection 850,000

Finding Irr (though given in the question)

Yr CF
- (850,000)
1 144,000
2 144,000
3 144,000
4 144,000
5 1,044,000
17.76718%

Amortisation schedule
Yr Op Intr Cash Clos

A
1 850,000 151,021 (144,000) 857,021
2 857,021 152,269 (144,000) 865,290

FC
3 865,290 153,738 (144,000) 875,027
4 875,027 155,468 (144,000) 886,495
5 886,495 157,505 (1,044,000) -

ir,
2 years later

Carrying amount 865,290

M
Case 1 Case 2
a
Yr CF PV CF PV
az

1 72,000 61,138 36,000 30,569

2 72,000 51,914 36,000 25,957
3 1,152,000 705,309 1,056,000 646,534
R

818,361 703,059
Fee paid 10,000 40,000
ed

Total Amount 828,361 743,059

Carrying amount 865,290 865,290
Change 36,929 122,230
hm

% change 4.27% 14.13%

Sginificance Not sign Significant

Case 1 Case 2
A

Journal
Liability 10,000 Find the new liability (at Fair value)
Cash 10,000 Yr CF PV
1 36,000 31,579
Gain / Loss on Modification 2 36,000 27,701
Carrying amount (aftr fee) 855,290 3 1,056,000 712,770
PV of Cash flows revised 818,361 772,050
Gain on modification 36,929
Old Liability 818,361
Liability 36,929 Cash 50,000
Gain on Modif 36,929 New liability 772,050
Gain on modif (3,689)
New amortisation schedule
Yr Op Intr Cash Closing
1 818,361 145,400 (72,000) 891,760
2 891,760 158,441 (72,000) 978,201
3 978,201 173,799 (1,152,000) -
 Page 63

Question 67 - Muskan Limited

Face value of the bond 13,500,000

Redmption price in 6 years 16,200,000
Irr of the loan 15.45845%

Irr claculation
Yr CF
- (13,500,000)
1 1,782,000
2 1,782,000
3 1,782,000
4 1,782,000
5 1,782,000
6 17,982,000
15.45845%

Amortisation schedule
Yr Op Intr Cash Closing
1 13,500,000 2,086,891 (1,782,000) 13,804,891
2 13,804,891 2,134,023 (1,782,000) 14,156,914
3 14,156,914 2,188,440 (1,782,000) 14,563,354
4 14,563,354 2,251,269 (1,782,000) 15,032,623
5 15,032,623 2,323,811 (1,782,000) 15,574,434

A
6 15,574,434 2,407,566 (17,982,000) -

At 1st year end (1 Jan 2012)

FC
Carrying amount 13,804,891

Extinguised liability
% extinguished 55.00%
Carrying amount 7,592,690

ir,
Consideration 8,500,000

Journal
Liability 7,592,690
M
Loss on extinguisment 907,310
Equity 8,500,000
a
Modification of remaining loan
az

% loan left over 45.00%

Carrying amount 6,212,201

PV of revised cash flows

R

Yr CF PV @ 15.45845%
1 - -
2 - -
ed

3 - -
4 - -
5 12,600,000 6,141,039
6,141,039
hm

Fee paid 500,000 in the form of equity

6,641,039
Change from CA 428,838
% change 6.903%
A

Immaterial change. Only fee is to be accounted for

and gain / loss on modification is to be charged

Journal
Liability 500,000
Equity 500,000

Gain / Loss on Modification

Gain / Loss on Modification
Carrying amount (after fee) 5,712,201
PV of Cash flows revised 6,141,039
Loss on modification (428,838)

Loss on modification 428,838

Liability 428,838

New amortisation schedule

Yr Op Intr Cash Clos
1 6,141,039 949,310 - 7,090,349
2 7,090,349 1,096,058 - 8,186,407
3 8,186,407 1,265,492 - 9,451,899
4 9,451,899 1,461,117 - 10,913,016
5 10,913,016 1,686,984 - 12,600,000
 Page 64

Question - 68
Face value of the bond 25,000,000
Coupon rate 12%
Redmption price in 6 years 30,000,000
Irr of the loan 13.08150%

Irr claculation
Yr CF
- (25,000,000)
1 3,000,000
2 3,000,000
3 3,000,000
4 3,000,000
5 3,000,000
6 3,000,000
7 3,000,000
8 3,000,000
9 3,000,000
10 33,000,000
13.08150%

Amortisation schedule
Yr Op Intr Cash Closing
1 25,000,000 3,270,376 (3,000,000) 25,270,376

A
2 25,270,376 3,305,745 (3,000,000) 25,576,121
3 25,576,121 3,345,741 (3,000,000) 25,921,863
4 25,921,863 3,390,970 (3,000,000) 26,312,832

FC
5 26,312,832 3,442,114 (3,000,000) 26,754,947
6 26,754,947 3,499,950 (3,000,000) 27,254,896
7 27,254,896 3,565,350 (3,000,000) 27,820,247
8 27,820,247 3,639,307 (3,000,000) 28,459,553
9 28,459,553 3,722,938 (3,000,000) 29,182,491
10 29,182,491 3,817,509 (33,000,000) (0)

ir,
At the end of year 5
Carrying amount 26,754,947
M
Extinguised liability
% extinguished 60.00%
Carrying amount 16,052,968
a
Consideration 16,600,000
az

Journal
Liability 16,052,968
Loss on exting 547,032
Equity 16,600,000
R

Modification of remaining loan

% loan left over 40.00%
ed

Carrying amount 10,701,979

PV of revised cash flows

Yr CF PV @ 13.081504%
hm

1 - -
2 - -
3 - -
4 - -
5 24,000,000 12,979,362
A

12,979,362
Fee paid 400,000 in the form of equity
13,379,362
Change from CA 2,677,384
% change 25.018%

Material change. Fair value of the new liability needs to be

calculated at market rate (13%).

Maturity value 24,000,000

PV at market rate 13% (single cash flow only) 13,026,238

Journal
Old liability 10,701,979
Loss on modification 2,724,260
New liability 13,026,238
Equity 400,000

New amortisation schedule

Yr Op Intr Cash Clos
1 13,026,238 1,693,411 - 14,719,649
2 14,719,649 1,913,554 - 16,633,204
3 16,633,204 2,162,317 - 18,795,520
4 18,795,520 2,443,418 - 21,238,938
5 21,238,938 2,761,062 (24,000,000) -
 Page 65

Question 69 - Summer 2009 Q2

Pakistani Sugar Company (PSC)

A
FC
ir,
M
a
az
R
ed
hm
A
 Page 66

Question 70 - Winter 2009 Q6

Arif Industries Limited

A
FC
ir,
M
a
az
R
ed
hm
A
 Page 67

Question 71 - Summer 2012 Q4 (ii) Zee Limited

A
FC
ir,
M
a
az
R
ed
hm
A
 Page 68

Question 72

1 Jan 2001
Investment 1,000,000
Cash 1,000,000
Impair Loss 25,000
Provision 25,000

A
FC
31 Dec 01
Cash
ir,
50,000
M
Interest Income 50,000
a
az
R

Impairment Loss 5,000

ed

Provision 5,000
hm
A
 Page 69

Question 73

1 Jan 2001
Investment 1,000,000
Cash 1,000,000
Impair Loss 25,000
OCI 25,000

31 Dec 01

A
Cash 50,000

FC
Interest Income 50,000
OCI 60,000
Investment
ir,
60,000
M
Impairment Loss 5,000
a

OCI 5,000
az
R

Investment 940,000
ed

OCI (30,000)
hm
A
 Page 70

Question 74 Irr
Yr CF
Face Value 1,000,000 - (1,000,000)
Coupon rate 1 50,000
2 Yrs 5.000% 2 50,000
2 Yrs 7.000% 3 70,000
Term 4 4 1,070,000
Irr 5.942% 5.9423%

Amortisation Schedule

A
Yr Op Intr Cash Clos

FC
1 1,000,000 59,423 (50,000) 1,009,423
2 1,009,423 59,983 (50,000) 1,019,407

ir,
3 1,019,407 60,577 (70,000) 1,009,983
4 1,009,983 60,017 (70,000) 1,000,000
M
a
2 Years Later
az

Carrying Amount 1,019,407

PV of cash flows 611,644
R

Impairment Loss 407,763

ed

Revised Cash flows @ Original Effective Rate

hm

Yr CF PV@5.942%
A

1 42,000 39,644
2 642,000 572,000
611,644
Journal
Impairment Loss 407,763
Investment 407,763
 Page 71

Question 75

Year 1 2 3 4 5

CSP 99.17% 98.02% 96.56% 94.81% 92.77%

CDP 0.83% 1.98% 3.44% 5.19% 7.23%
PDP 0.830% 1.150% 1.460% 1.750% 2.040%

Exposure 1,050 1,050 1,050 1,050 1,050

LGD 60% 60% 60% 60% 60%

Loss Allowance 5.23 7.25 9.20 11.03 12.85

PV 4.98 6.57 7.95 9.07 10.07

We shall only recognise the PV of 12 months credit losses.

A
Yr 0
Investment 1,000

FC
Cash 1,000
Yr 0
Impairment Loss 4.98

ir,
Provision 4.98
M
Question76
At Year 1 end
a
az

Year 1 2 3 4
R

CSP 98.02% 95.76% 93.24% 90.48%

CDP 1.98% 4.24% 6.76% 9.52%
PDP 1.980% 2.260% 2.520% 2.760%
ed

Exposure 1,050 1,050 1,050 1,050

hm

LGD 60% 60% 60% 60%

Loss Allowance 12.47 14.24 15.88 17.39

PV 11.88 12.91 13.71 14.31
A

Yr 1
Cash 50
Interest Income 50

Case 1 If credit risk increases substentialy (record life time losses)

Impairment loss 47.83 Total - 4.98 of last year

Provision 47.83
Question 77
Case 2 If credit risk does not increase substentialy (update 12 M credit losses)

Impairment loss 6.90 11.88 - 4.98 of last year

Provision 6.90
 Page 72

Question 78

Past Due Default Rate % of Receivables Rece Provision

Now 0.30% 60% 12,000,000 36,000
Upto 30 days 1.60% 25% 5,000,000 80,000
From 31 to 60 Days 3.60% 5% 1,000,000 36,000
61 to 90 Days 6.60% 8% 1,600,000 105,600
More than 90 days 10.60% 2% 400,000 42,400
20,000,000 300,000

Imp. Loss 250,000

Provision 250,000

Question 79

Past Due Default Rate Gross CA (Rs Million) Provision

A
Now 0.50% 10.1 0.0505

FC
Upto 30 days 1.50% 4.3 0.0645
From 31 to 60 Days 6.10% 1.6 0.0976
More than 60 days 16.50% 1 0.1650
17.00 0.38

Imp. Loss 0.178

ir,
M
Provision 0.178
a
az
R
ed
hm
A
 Page 73

Question - 80 Summer 2014 Q3(b)

ELEGANT GENERATORS LIMITED

Receipts terms CF PV @ 12%

10% upfront 600,000 600,000
Remaining in 1 yr 5,400,000
Interst charged @ 6% 324,000
5,724,000 5,110,714
Reveue at PV 5,710,714

Journal
1 Jan 13
Cash 600,000
Account Rece 5,110,714
Sales 5,710,714

31 Dec 13
Account Rece 613,286
Interest Income 613,286

A
Account Rece CA 5,724,000

FC
PV of revised CF(w1) 5,544,169
Loss on modification 179,831
31 Dec 13
Imp.loss 179,831

ir,
Investment 179,831

working1
M
PV of revised Cash Flows
12% yearly
a
6% half-yearly Amortization Schedule
Yr CF PV@6% Year opening interest cash closing
az

1 1,600,000 1,509,434 30-Jun-14 5,544,169 332,650.14 (1,600,000) 4,276,819

2 1,600,000 1,423,994 30-Dec-14 4,276,819 256,609.15 (1,600,000) 2,933,428
R

3 1,600,000 1,343,391 30-Jun-15 2,933,428 176,005.70 (1,600,000) 1,509,434

4 1,600,000 1,267,350 30-Dec-15 1,509,434 90,566.04 (1,600,000) -
5,544,169
ed

Suggested Solution by ICAP

hm
A
 Page 74

Question 81 Winter 2016 Q4(b)

AML

Amoritsation Schedule
Face Value 100.00 Yr Op Intr Cash Clos
Premium 5.00 1.00 106.50 4.81 (6.00) 105.31
Tr Cost 1.50 2.00 105.31 4.76 (6.00) 104.07
Cost of purchase 106.50 3.00 104.07 4.70 (6.00) 102.77
4.00 102.77 4.64 (6.00) 101.42
1 Jul 2013 5.00 101.42 4.58 (6.00) 100.00
Investment 106.50

A
Cash 106.50 original effective rate 4.5186%

FC
Restructuring

ir,
30-Jun-16 Investment
M 2.20
CA at 30 June 2016 102.77 Gain on mod 2.20
PV of revised CF 104.98 Impairment Loss 5.00
a
Gain on modification 2.20 Provision 5.00
az

PV of revised Cash Flows using original effective rate

R

Yr CF PV
ed

1.00 6.25 5.98

2.00 6.25 5.72
hm

3.00 106.50 93.28

104.98
A
 Page 75

Question 82 - Summer 2013 Q5 Qasmi Inv Limited

A
FC
ir,
M
a
az
R
ed
hm
A
 Page 76

Question 83 - Summer 2017 Q3(b)

Investment in KL - Equity Inv - FV through OCI

Investment in BL - Equity Inv - FV through P/L

Investment in BL is an equity investment. As the directors decided to sell the shares before
31 Dec and the FV model need to be changed. However the standard doesnot allow the
reclassification of Equity Investments.

Impairment Loss will be ignored as the model of equity investments is FV through P/L

A
FC
ir,
M
a
az
R
ed
hm
A
 Page 77

Question 84
Bonds FV through OCI
coupon Rate 5%
Effective rate 15%

Face Value 10,000,000

premium paid -
Fair Value 10,000,000
tr cost -

01-Dec-13 Investment 10,000,000

Cash 10,000,000

year opening Interest cash closing CA FV OCI

A
2014 10,000,000 1,500,000 (500,000) 11,000,000 11,000,000 9,000,000 (2,000,000)

FC
30-Nov-14 12 months expected CL 200,000
Lifetime expected CL 400,000

30-Nov-14 Cash 500,000

ir,
Investment 1,000,000
M
Int Income 1,500,000
a
az

OCI 2,000,000
Investment 2,000,000
R

Imp loss 200,000

OCI 200,000
ed
hm
A
 Page 78

Question 87 - Summer 2019 Q5

French Limited

Face value 1,500,000

discount (60,000)
1,440,000
tr cost 35,000
1,475,000

A
FC
ir,
M
a
az
R
ed
hm
A
 Page 79

Question 88 - Winter 2020 Tabeeb Limited Q2

A
FC
ir,
M
a
az
R
ed
hm
A
 Page 80

Question 89

A
FC
ir,
M
a
az
R
ed
hm
A
 Page 81

Question 90

A
FC
ir,
M
a
az
R
ed
hm
A
 Page 82

Question 91
Forward Contract with Foreign Currency Loan
1 June 30 June 30 Sept
Spot 90 87 85
Futire 93 89 85
USD 100,000 100,000 100,000

Spot 9,000,000 8,700,000 8,500,000

Future 9,300,000 8,900,000 8,500,000

A
1 June

FC
Acc Rece 9,000,000
Sales 9,000,000

ir,
30 June M
Exch Loss 300,000
Account Rece 300,000
a
az

Der Asset 400,000

Profit and Loss 400,000
R

30 Sep
ed

Exch Loss 200,000

hm

Account Rece 200,000

Der Asset 400,000
A

Profit and Loss 400,000

30 Sep
Cash 800,000
Derv Asset 800,000
Cash 8,500,000
Account Rece 8,500,000
 Page 83

Question 92

A
FC
ir,
M
a
az
R
ed
hm
A
 Page 84

Question 93
1 May 30 June 15 July
Spot 100 120 115
Call 4.00 21.50 15.70

1 May
Call Option 2,000
Cash 2,000
30 June
Call Option 8,750
P/L 8,750
15 July

A
P/L 2,900

FC
Call Option 2,900

ir,
Buying Shares in Option
M
15 July
Investment 57,500
a

P/L 350
az

Cash 50,000
R

Call Option 7,850

ed

Lapsing the option

P/L 7,850
hm

Call Option 7,850

A

Encashing the option

Cash 7,850
Call option 7,850
Investment 57,500
Cash 57,500
Net Cash
Sales of option (7,850)
Cash paid 57,500
49,650
 Page 85

Question 94
31 Dec 00 31 Dec 01 31 Dec 02
Spot 200,000 190,000 185,000
Put Option 11,100 13,500 15,000

31 Dec 00
Put Option 11,100
Cash 11,100
31 Dec 01
Put Option 2,400

A
Profit and Loss 2,400

FC
31 Dec 02
Put Option 1,500
Profit and Loss 1,500

ir,
Encashing
M
a
31 Dec 02
az

Cash 15,000
R

Derv Assets 15,000

ed

Utilising
Investment 185,000
hm

Cash 185,000
Cash 200,000
A

Investment 185,000
Derv Assets 15,000

Option Lapsed
Profit and Loss 15,000
Derivative Assets 15,000
 Page 86

Question95
Units Rate Amount
Current Wealth 100 60 6,000
Rights 25 40 1,000
125 56.00 7,000

Rights 400
Investment 400

A
FC
ir,
M
a
az
R
ed
hm
A
 Page 87

Question 96

A
FC
ir,
M
a
az
R
ed
hm
A
 Page 88

Question 97

1-Mar-14 Investment 5,600,000

Cash 5,600,000

26-Apr-14 Book Closure Date

Investment 1,200,000
OCI 1,200,000

shares price total

old shares 200,000 34 6,800,000
rights 50,000 18 900,000
250,000 30.80 7,700,000

Rights - Derivative 640,000 IV 12.80

A
Investment 640,000

FC
15-May-14 Rights - Derivative 60,000 IV 14
P/L 60,000

ir,
Investment 840,000
OCI M 840,000

30-Jun-14 Rights - Derivative 100,000 IV 16

P/L 100,000
a
az

Investment 200,000
OCI 200,000
R

15-Jul-14 Investment 2,050,000 41

Rights - Derivative 800,000 (18)
ed

Cash 900,000 23
gain on exercise 350,000 (16)
hm

7 50,000 350,000
Investment 800,000
OCI 800,000
A
 Page 89

Question 98
FV 35
1-Mar-14 Investment 12,250,000
Cash 12,250,000

26-Apr-14 Book Closure Date

FV 38
Investment 1,050,000
OCI 1,050,000

SHARES PRICE TOTAL

old shares 350,000 38 13,300,000 Intrinsic value of derivative 14
rights shares 87,500 20 1,750,000
437,500 34.40 15,050,000

Rights Derivatives 1,260,000

Investment 1,260,000

A
30-Jun-14 FV 36

FC
Intrinsic value 16

Rights Derivatives 175,000

Investment 560,000

ir,
OCI 560,000
P/L M 175,000

15-Jul-14 FV 41
Intrinsic value 21
a
Investment 1,750,000
az

OCI 1,750,000

Investment - Rights Share 3,587,500

R

Cash 1,750,000
Rights Derivatives 1,435,000
ed

gain on exercise 402,500

hm
A
 Page 90

Question 99

A
FC
ir,
M
a
az
R
ed
hm
A
 Page 91

Question 100

A
FC
ir,
M
a
az
R
ed
hm
A
 Page 92

Question 101

31 Mar 30 April 31 May 30 June

Spot 140 146 152 160
Future 145 150 154 160

Spot 7,000,000 7,300,000 7,600,000 8,000,000

Future 7,250,000 7,500,000 7,700,000 8,000,000

Spot Change 300,000 300,000 400,000

Future Change (250,000) (200,000) (300,000)

1 Feb
Inventory 5,250,000
Cash 5,250,000
30 April
P/L 250,000
Derv Liability 250,000
31 May
P/L 200,000
Derv Liability 200,000

A
30 June
P/L (300,000)

FC
Derv Liability (300,000)
30 June
Cash 8,000,000
Sales 8,000,000
30 June

ir,
COGS 5,250,000
Inventory 5,250,000 M
Sales 8,000,000
COGS (5,250,000)
2,750,000
a
Hedging losses (750,000)
2,000,000
az

1 Feb
Inventory 5,250,000
R

Cash 5,250,000
30 April
P/L 250,000
ed

Derv Liability 250,000

30 April
Inventory 300,000
hm

P/L 300,000
31 May
P/L 200,000
Derv Liability 200,000
A

31 May
Inventory 300,000
P/L 300,000
30 June
P/L 300,000
Derv Liability 300,000
30 June
Inventory 400,000
P/L 400,000
30 June
Cash 8,000,000
Sales 8,000,000
30 June
COGS 6,250,000
Inventory 6,250,000

Sales 8,000,000
COGS (6,250,000)
1,750,000
Hedging losses 250,000
2,000,000
 Page 93

Question 102

1 November 2015
Carrying amouny 400,000
Fair Value 600,000

At Year end

A
FC
P/L 20,000
Inventory 20,000
ir,
M
Derivative Asset 20,000
a

P/L 20,000
az
R

Statement of Financial Position

ed

Inventory 380,000
hm

Derivative Asset 20,000

A
 Page 94

Question 103

Carrying amount at 1 Dec 2003

Inventory 800,000 (Rs 20 per unit)

1 Dec 31 Dec
Spot 20.00 22.25
Future 22.00 24.00

A
Hedge Accounting

FC
31 Dec
Inventory 90,000
P/L ir, 90,000
M
31 Dec
a
az

P/L 80,000
Derv Liability 80,000
R
ed
hm
A
 Page 95

Question 104

1 June 2006
Inventory 2000000
Cash 2000000

1 Jul 06 31 Dec 06 30 Jun 06

Spot 200 220 230
Future 210 227 230

Spot Full 2000000 2200000 2300000

A
Future Full 2100000 2270000 2300000

FC
Spot Change 200000 100000

ir,
Future Change 170000 30000
M
31 Dec
a
Inventory 200000
az

P/L 200000
P/L 170000
R

Derv Liability 170000

ed

30 Jun
Inventory 100000
hm

P/L 100000
P/L 30000
A

Derv Liability 30000

30 Jun
Cash 2300000
Sales 2300000
COGS 2300000
Inventory 2300000
Derv Liability 200000
Cash 200000
 Page 96

Question 105
31 Mar 30 Apr 31 May 30 June
Spot 62 58 52 51
Future 65 60 53 51

Full Values
Spot 1,240,000 1,160,000 1,040,000 1,020,000
Future 1,300,000 1,200,000 1,060,000 1,020,000

Chnages
Spot 80,000 120,000 20,000
Futures 100,000 140,000 40,000

28 Feb
Inventory 1,000,000
Cash 1,000,000

A
Cashflow Hedge Accounting FV Hedge Accounting
30 April 30 April Derv Asset 100,000

FC
Derivative Asset 100,000 P/L 100,000
OCI 80,000 P/L 80,000
P/L 20,000 Inventory 80,000

31 May 31 May
ir,
Derivative Asset 140,000
M Derv Asset 140,000
OCI 120,000 P/L 140,000
a
P/L 20,000 P/L 120,000
Inventory 120,000
az

30 Jun 30 Jun
Derivative Asset 40,000 Derv Asset 40,000
R

OCI 20,000 P/L 40,000

P/L 20,000 P/L 20,000
ed

Inventory 20,000
30 Jun
Cash 1,020,000 Cash 1,020,000
hm

Sales 1,020,000 Sales 1,020,000

Cost of sales 1,000,000 Cost of sales 780,000
Inventory 1,000,000 Inventory 780,000
A

OCI 220,000 Cash 280,000

Sales 220,000 Derv Asset 280,000
Cash 280,000
Derivative Asset 280,000

Question 106
Spot Change 8,800
Future change 9,100
Ineffective 300

OCI 8,800
P/L 300
Derivative Liability 9,100
 Page 97

Question 107
1 Nov 31 Dec 1 Nov
Spot 0.69 0.83 1.00
Future 0.67 0.81 1.00

Full Values
Spot 41,379 50,000 60,000
Future 40,000 48,387 60,000

Changes

A
FC
Spot 8,621 10,000
Future 8,387 11,613

31 Dec
ir,
M
Derv Asset 8,387
a
OCI 8,387
az
R

1 Nov
ed

Derv Asset 11,613

P/L 1,613
hm

OCI 10,000
A

1 Nov
Machine 60,000
Cash 60,000
OCI 18,387
Machine 18,387
 Page 98

Question 108
Units Cost/Unit Total Cost
Inventories 24,000 345 8,280,000

31 Oct 30 Sept 31 Oct

Spot 414 383
Future 388 352

Full Values
Spot 9,938,000 9,186,000

A
Future 9,312,000 8,448,000

FC
Change
Spot (752,000)
Future
ir,
864,000
M
30 Sept
a

Derivative Asset 864,000

az

OCI 752,000
R

P/L 112,000
ed
hm
A
 Page 99

Question 109 - Winter 2012 Q2 (a)

Crow Textile Mills Limited

A
FC
ir,
M
a
az
R
ed
hm
A
 Page 100

Question 110
1 Nov 31 Dec 30 Jan
Spot 1.55 1.59 1.61
Future 1.57 1.60 1.61

Full Values
Spot 1,550,000 1,590,000 1,610,000
Future 1,570,000 1,600,000 1,610,000

A
FC
31 Dec
Derv Asset 30,000

ir,
OCI M 30,000

30 Jan
a
az

Derv Asset 10,000

OCI 10,000
R
ed

Cash 40,000
hm

Derv Asset 40,000

A
 Page 101

Question 111 - Winter 2013 Q7

Dynamic Steels Limited

1 Jun 30 Sept 1 Nov 1 Dec

Spot 14.50 12.00 11.15 10.00
Future 15.00 12.39 11.35 10.00

Full Values
Spot 725.00 600.00 557.50 500.00
Future 750.00 619.50 567.50 500.00

Changes

A
Spot 125.00 42.50 57.50
Future 130.50 52.00 67.50

FC
30 Sept
OCI 125.00

ir,
P/L 5.50
Derv Liability 130.50
M
1 Nov
a
az

OCI 42.50
P/L 9.50
R

Derv Liability 52.00

ed

1 Nov
PPE 557.50
hm

Payable 557.50
PPE 167.50
OCI 167.50
A

1 Dec
Payable 557.50
Exchg Gain 57.50
Cash 500.00

1 Dec
P/L 67.50
Derv Liability 67.50
Deriv Liab 250.00
Cash 250.00
 Page 102

Question 112 - Summer 2017 Q5

Pasham Telecom Limited PTL

1 Oct 2016
Cash 900.00
Loan Payable 900.00

Swap Setup

A
FC
Brokerage Expense 1.00
Cash 1.00

Interest Payment %
ir,
M
To Bank (8.00)
a

To CP (Variable) (6.27)
az

From CP 6.50
R

(7.77)
ed

31 Dec
Interest Expense 17.48
hm

Cash 17.48
A

Loan Payable 7.20

P/L 7.20
P/L 7.29
Derivative Liability 7.29
 Page 103

Question 113 - Winter 2015 Q6

Asia Sports Limited

1 May 30 Jun 1 Aug

Spot 103.20 105.38 106.00
Future 103.63 105.50 106.00

Full Values
Spot 619.20 632.28 636.00
Future 621.78 633.00 636.00

Change
Spot 13.08 3.72
Future 11.22 3.00

If done through Cashflow Hedge

30 June
Derivative Asset 11.22
OCI 11.22

1 Aug

A
Derivative Asset 3.00
OCI 3.00

FC
1 Aug
Machine 636.00
Cash 636.00
Cash 14.22

ir,
Derv Asset 14.22
OCI 14.22
PPE 14.22
M
If done through FV hedge
a
1 May 30 Jun 1 Aug
Spot 103.20 105.38 106.00
az

Future 103.63 105.50 106.00

Full Values
R

Spot 619.20 632.28 636.00

Future 621.78 633.00 636.00
ed

Change
Spot 13.08 3.72
Future 11.22 3.00
hm

30 June
Derivative Asset 11.22
P/L 11.22
P/L 13.08
A

Firm Comt Liab 13.08

1 Aug
Derivative Asset 3.00
P/L 3.00
P/L 3.72
Firm Comt Liab 3.72

1 Aug
Machine 636.00
Cash 636.00
Cash 14.22
Derv Asset 14.22
Firm Comit Liab 16.80
PPE 16.80

Overall P/L Hit

Depr 621.78 619.20
P/L Hit 2.58
621.78 621.78
Cash Paid 621.78 621.78
 Page 104

Question 114

1 Jan 31 Mar 30 Jun 31 Jul

Spot 120 132 143 150
Future 126 134 145 150

Full Values
Spot 9,600,000 10,560,000 11,440,000 12,000,000
Future 10,080,000 10,720,000 11,600,000 12,000,000

Changes
Spot 960,000 880,000 560,000
Future 640,000 880,000 400,000

31 Mar
P/L 960,000

A
Firm Commit Liab 960,000

FC
Deriv Asset 640,000
P/L 640,000

30 Jun

ir,
P/L 880,000
Firm Commit Liab 880,000
M
Deriv Asset 880,000
P/L 880,000
a
az

1 Aug
P/L 560,000
Firm Commit Liab 560,000
R

Deriv Asset 400,000

P/L 400,000
ed

1 Aug
hm

PPE 12,000,000
Cash 12,000,000
Firm Comm Liab 2,400,000
A

PPE 2,400,000
Cash 1,920,000
Deriv Asset 1,920,000

Depr 9,600,000
P/L 480,000
Net Hit 10,080,000

Cash Paid 10,080,000

 Page 105

Question 115

1 April
Investment 5,000,000
Cash 5,000,000

Interest Rate
From bank 7.000
To CP (5.000)
From CP Kibor 4.562

A
Net interest received 6.562

FC
30 June
Cash 82,025
ir,
M
Interest Income 82,025
a
az

Carrying amount of Invest 5,000,000

FV after Mrkt Changes 4,919,533 (80,467)
R

FV after after full changes 4,815,300 (104,233)

ed

OCI 104,233
hm

P/L 80,467
Investment 184,700
A

Derivative Asset 80,592

P/L 80,592
 Page 106

Question 116

1 Jul 31 Jul 31 Aug 31 Dec

Spot 7.85 7.90 7.93 8.05
Future 8.00 8.06 8.10 8.05

Full Values
Spot 785,000 790,000 793,000 805,000
Future 800,000 806,000 810,000 805,000

Changes
Spot 5,000 3,000 12,000
Future 6,000 4,000 (5,000)

A
31 Jul

FC
Der Asset 6,000
OCI 5,000

ir,
P/L 1,000
M
31 Aug
Der Asset 4,000
a
OCI 3,000
az

P/L 1,000
R

31 Aug here the inventory is received but payment is not made

Inventory 793,000
ed

Payable 793,000
OCI 8,000
hm

Inventory 8,000

Net Carrying amount of Inventory 785,000

A

31 Dec
P/L 12,000
Payable 12,000
P/L 5,000
Derv Asset 5,000
Cash 5,000
Derv Asset 5,000
Payable 805,000
Cash 805,000
COGS 314,000
Inventory 314,000
 Page 107

Question 117
Hedging of a Recognized Liability

1 May 30 Jun 31 Jul

Spot 6.80 6.88 7.25
Future 6.87 6.96 7.25

Full Values
Spot 680,000 688,000 725,000
Future 687,000 696,000 725,000

Changes
Spot 8,000 37,000

A
Future 9,000 29,000

FC
1 May
Inventory 680,000

ir,
Payable 680,000
M
30 June
Derv Asset 9,000
a
OCI 8,000
az

P/L 1,000
Exchange Loss 8,000
R

Payable 8,000
OCI 8,000
ed

P/L 8,000
hm

31 Jul
Derv Asset 29,000
OCI 29,000
A

Exchange Loss 37,000

Payable 37,000
OCI 29,000
P/L 29,000
Payable 725,000
Cash 725,000
Cash 38,000
Derv Asset 38,000
 Page 108

Question 118

1 Jan
Investment 100,000
Cash 100,000

A
Interest Payment

FC
From Bank 7.00 kibor +2%

ir,
To CP M (5.00) kibor
From CP 5.50 5.50%
a

Net Interest Received 7.50

az
R

Cash 7,500
ed

Interest Income 7,500

hm
A

OCI 1,000
Investment 1,000
Derv Asset 3,200
OCI 3,200
 Page 109

Question 119

Interest Payment
entity x pays (libor +2%)
To CP (5.00) libor
From CP libor 5.50%
Net Interest payment 7%

1 Jan 2010
Cash 100,000,000

A
Loan Payable 100,000,000

FC
31 Dec 2010
Interst Expense 7,500,000
Cash 7,500,000
Swap Asset 4,068,000
ir,
M
OCI 4,068,000
a
az

31 Dec 2011
Interst Expense 7,500,000
R

Cash 7,500,000
ed

Swap Asset 1,725,000

OCI 1,725,000
hm

31 Dec 2012
A

Interst Expense 7,500,000

Cash 7,500,000
OCI 3,490,000
Swap Asset 3,490,000

31 Dec 2013
Interst Expense 7,500,000
Cash 7,500,000
OCI 2,062,000
Swap Asset 2,062,000
 Page 110

Question 122

- 1 2 3 4 5
Interest 500,000 500,000 500,000 500,000 500,000
PV @ 8% 462,963 428,669 396,916 367,515 340,292

Principal 5,000,000
(5,000,000) 3,402,916
FV of bond 5,399,271
399,271
80% of principal is sold
Inv 399,271
P/L 399,271
Cash 2,722,333

A
Inv 2,722,333

FC
ir,
M
a
az
R
ed
hm
A
 Page 111

Q 123
Repo Agreement
Compulsory REPO @ Fixed Price
Risk and rewards not transferred, hence donot derecognize

Cash 1,000,000
Repo Liab 1,000,000

Int exp 30,000

Repo Liab 30,000

Repo Liab 1,030,000

Cash 1,030,000

Question 124

A
FC
ir,
M
a
az
R
ed
hm
A
 Page 112

Question 125 - Summer 2012 Q4(i)

Zee Power Limited

A
FC
ir,
M
a
az
R
ed
hm
A
 Page 113

Question 126

OCI 1,000,000
REC 1,000,000

Cash 19,000,000
Inv 19,000,000
without recouse - Investment derecognized

A
Question 127

FC
with recourse
Day1 Cash 16,000,000
Financial Liab
ir, 16,000,000
M
a
Interest to be recorded on 16m
az

remaining amount 4,000,000

less interest (400,000)
R

less 10% bad debts (2,000,000)

ed

1,600,000
hm

Day90 Cash 1,600,000

Int exp P/L 400,000
A

Financial Liab 16,000,000

Receivables 18,000,000
 Page 114

Question 128

A
FC
Question 129 - Winter 2008 Q2©
ir,
M
a
az
R
ed
hm
A
 Page 115

Question 130

FVTPL
Investment 40,000,000
P/L - Tr.cost 1,000,000
Cash 41,000,000

Cash 70,000,000
Profit 30,000,000

A
Inv 40,000,000

FC
FVTOCI Only capitalize the tr cost paid
ir,
M
Question 131
a
az

Inv 500,000
Cash 500,000
R
ed

Pv of four interest payments @ 6%

hm

Original IRR 6%
A

Pv of four interest payments @ 6% 103,953

FV 108,897
profit 4,944

Cash 108,897
Inv 103,953
profit 4,944
 Page 116

Question 132

A
FC
ir,
M
a
az
R
ed
hm
A
 Page 117

Question 133

A
FC
ir,
M
a
az
R
ed
hm
A
 Page 118

Question 134

A
FC
ir,
M
a
az
R
ed
hm
A
 Page 119

Question 135
Cash 80,000
Financial Liab 80,000

Case (a) 100% debtors collected

Interest Exp P/L 8,000

Financial Liab 8,000

Cash 12,000

A
Financial Liab 88,000

FC
Receivable 100,000

ir,
Case (b) 90% debtors collected M
Interest Exp P/L 8,000
a
Financial Liab 8,000
az
R

Cash 2,000
Financial Liab 88,000
ed

Receivable 90,000
hm

Case © 70% debtors collected

Interest Exp P/L 8,000
A

Financial Liab 8,000

Financial Liab 88,000

Cash 18,000
Receivable 70,000
 Page 120

Question 136

CA 5,000,000
Cash Received 4,990,000
this includes 20,000 for guarantee service & 4,970,000 for portfolio
now this question includes factor with recourse and without recourse as well
Portfolio 5,000,000
we have guarantee to limit of 500,000 which means the rest is without recourse

Cash for portfolio will be divided into two parts ; with recourse and without recourse

Cash for portfolio 4,970,000

recourse (500,000)
without recourse 4,470,000

Cash 4,490,000
Transferred Asset 500,000

A
loss 30,000
Associated Liab 520,000

FC
Receivable 5,000,000

ir,
Question 137

Cash 840
M
Financial Liab 840
a
Int Exp 15
az

Financial Liab 15

Financial Liab 855

R

Cash 855
ed

Question 138

Cash 900
hm

Repo Liab 900

Inv 40
A

Int Income on bond 40

Repo Liab 40
Inv 40

int Expense for Repo 30

Repo Liab 30

Repo Liab 890

Cash 890