A £1 million face value bond issued with zero coupons repayable after two years. The bond has the same credit rating as the bond above and interest on the bond accrues annually.Lochinver accounts for its bond issuances according to IFRS.
A What amount of interest expense would be reported in the first year, using the effective interest rate method?
B Determine the reported value of the bonds (i.e. the book value) at the end of the first year.？
C What would the cash flow statement show in the first year and the second year assuming the bonds are fully redeemed?
