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Section B - Case 3: PayStream (Question 1 of 5)
Scenario: PayStream, a FinTech firm whose functional currency is the Dinar (D), issued 10,000 convertible bonds on 1 January 20X5 at their par value of D100 each. The bonds pay a 4% coupon annually in arrears and mature in 3 years. Similar bonds without a conversion option carry an interest rate of 7%. (PV of $1 at 7% for 3 yrs = 0.8163; PV of $1 annuity at 7% for 3 yrs = 2.6243).
On 1 July 20X5, PayStream bought 50,000 shares in DataCo for D3 each, irrevocably designating them at Fair Value Through OCI (FVTOCI). At 31 December 20X5, the shares traded at D3.50.
On 1 November 20X5, PayStream bought servers from a US supplier for $100,000 USD. Exchange rates: 1 Nov: $1 = D0.80; 31 Dec: $1 = D0.85. The invoice is unpaid at year-end.
Question: What is the value of the liability component of the convertible bonds on initial recognition at 1 January 20X5?
ACCA · Question 29 · Financial Instruments
Section B - Case 3: PayStream (Question 4 of 5)
Scenario: PayStream, a FinTech firm whose functional currency is the Dinar (D), issued 10,000 convertible bonds on 1 January 20X5 at their par value of D100 each. The bonds pay a 4% coupon annually in arrears and mature in 3 years. Similar bonds without a conversion option carry an interest rate of 7%. (PV of $1 at 7% for 3 yrs = 0.8163; PV of $1 annuity at 7% for 3 yrs = 2.6243).
On 1 July 20X5, PayStream bought 50,000 shares in DataCo for D3 each, irrevocably designating them at Fair Value Through OCI (FVTOCI). At 31 December 20X5, the shares traded at D3.50.
On 1 November 20X5, PayStream bought servers from a US supplier for $100,000 USD. Exchange rates: 1 Nov: $1 = D0.80; 31 Dec: $1 = D0.85. The invoice is unpaid at year-end.
Question: How is the D25,000 increase in the value of the DataCo shares treated in the financial statements for the year ended 31 December 20X5?
Section B - Case 3: PayStream (Question 4 of 5)
Scenario: PayStream, a FinTech firm whose functional currency is the Dinar (D), issued 10,000 convertible bonds on 1 January 20X5 at their par value of D100 each. The bonds pay a 4% coupon annually in arrears and mature in 3 years. Similar bonds without a conversion option carry an interest rate of 7%. (PV of $1 at 7% for 3 yrs = 0.8163; PV of $1 annuity at 7% for 3 yrs = 2.6243).
On 1 July 20X5, PayStream bought 50,000 shares in DataCo for D3 each, irrevocably designating them at Fair Value Through OCI (FVTOCI). At 31 December 20X5, the shares traded at D3.50.
On 1 November 20X5, PayStream bought servers from a US supplier for $100,000 USD. Exchange rates: 1 Nov: $1 = D0.80; 31 Dec: $1 = D0.85. The invoice is unpaid at year-end.
Question: How is the D25,000 increase in the value of the DataCo shares treated in the financial statements for the year ended 31 December 20X5?
Answer options:
Recognized in profit or loss as investment income
Recognized in Other Comprehensive Income and accumulated in an equity reserve
Ignored until the shares are sold
Deducted from the carrying amount of the investment
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