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Differentiate between redeemable preference shares and irredeemable preference shares and state how each type should...

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Accounting

  1. Differentiate between redeemable preference shares and irredeemable preference shares and state how each type should be accounted for in the financial statements of a company. (4 marks)
  2. Define compound financial instruments and explain how they should be accounted for in the financial statements of any entity according to the relevant IFRS. (6 marks)

  1. Port Enterprise Limited (PEL) issued $6,000,000 convertible debentures at January 1, 2019. The debentures have a four-year term, and interest is payable annually in arrears at a nominal annual interest rate of 10% percent. When the debentures were issued, the prevailing market interest rate for similar debt without conversion options was 13 %.

The following discount rates are available:

End of year

PVIFA 10%

PVIFA 13%

Year 1

0.9091

0.8850

Year 2

0.8264

0.7831

Year 3

0.7513

0.6931

year 4

0.6830

0.6133

Required:

In relation to the convertible debentures disclosed above, prepare extracts of the entitys statement of profit or loss and statement of financial position for the year ended December

31, 2012. (Show all workings.)

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