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AB acquired an investment in a debt instrument on 1 January 20X5 at its nominal value of $25,000, which it intends to hold until maturity. The instrument carried a fixed coupon interest rate of 5%, payable in arrears. Transactions costs of $5,000 were paid in respect of this investment. The effective interest rate applicable to this instrument was estimated at 9%.

Calculate the value of this investment that AB will include in its statement of financial position at 31 December 20X5.

Give your answer to the nearest whole number.

$ ?

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Question 2

Which of the following would limit the effectiveness of analysis performed on the operating profit margins of two separate entities with the same total revenue over a12 month period?

Options:

Different accounting estimates in respect of depreciation of property, plant and equipment.

Different approaches to allocating expenses to cost of sales, administration expenses and distribution costs.

Different interest rates on loan finance available to the entities.

Different pattern of monthly revenues caused by seasonality.

Question 3

The consolidated statement of profit or loss for VW for the year ended 30 September 20X7 includes the following:

What is VW's interest cover for the year ended 30 September 20X7?

Options:

4.5

3.3

4.1

5.1

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