At 30 June 2002 a company had $1m 8% loan notes in issue, interest being paid half-yearly on 30 June and
31 December.
On 30 September 2002 the company redeemed $250,000 of these loan notes at par, paying interest due to that
date.
On 1 April 2003 the company issued $500,000 7% loan notes, interest payable half-yearly on 31 March and
30 September.
What figure should appear in the company’s income statement for interest payable in the year ended 30 June
2003?
A $88,750
B $82,500
C $65,000
D $73,750.

D
A $80,000 + 7% x $500,000 x 3/12
B As D but including 7% x $500,000 x 6/12 instead of 3/12
C As D but excluding 7% x $500,000 x 3/12
D 8% x $1m x 3/12 + 8% x $750,000 x 9/12 + 7% x $500,000 x 3/12