JACOBUS LIMITED
Calculations
| Date of cash flow | CU | |
| 01/01/2014 | (CU500,000 x 105%) | (525,000) |
| 31/12/2014 | (CU500,000 x 18%) | 90,000 |
| 31/12/2015 | (CU500,000 x 18%) | 90,000 |
| [(CU500,000 x 95%)/2] | 237,500 | |
| 31/12/2016 | [(CU500,000 – CU250,000) x 18%] | 45,000 |
| [(CU500,000 x 95%)/2] | 237,500 |
Calculation of the fair value of the investment on initial recognition
| Cf0 | 0 |
| Cf1 | 90,000 |
| Cf2 | 90,000 + 237,500 = 327,500 |
| Cf3 | 45,000 + 237,500 = 282,500 |
| I/YR | 14,5 |
| NPV = | ? = 516,599,52 |
Calculation of “i” (the effective interest rate) as the present value changed due to the CU15,000 transaction costs that must now be capitalised to the amount initially recognised for the investment
| Cf0 | – (516,599,52 + 15,000,00) = – 531,599,52 |
| Cf1 | 90,000 |
| Cf2 | 90,000 + 237,500 = 327,500 |
| Cf3 | 45,000 + 237,500 = 282,500 |
| IRR = | ? = 13,03% |
1. General journal of Jacobus Limited
| DR
CU |
CR
CU |
||
| 2014 | |||
| 01/01 | Investment in debentures (SFP) | 516,599,52 | |
| Fair value adjustment (other expenses) (P or L) | 8,400,48 | ||
| Bank (SFP) | 525,000,00 | ||
| Investment in debentures (SFP) | 15,000,00 | ||
| Bank (SFP) | 15,000,00 | ||
| 31/12 | Investment in debentures (SFP) | 69,267,42 | |
| Finance income (P or L) | 69,267,42 | ||
| CU531,599,52 x 13,03% | |||
| 31/12 | Bank (SFP) | 90,000,00 | |
| Investment in debentures (SFP) | 90,000,00 | ||
| Balance on Investment in debentures account: CU531,599,52 + CU69,267,42 – CU90,000,00 = CU510,866,94 | |||
| 2015 | |||
| 31/12 | Investment in debentures (SFP) | 66,565,96 | |
| Finance income (P or L) | 66,565,96 | ||
| CU510,866,94 x 13,03% | |||
| 31/12 | Bank (SFP) | 90,000,00 | |
| Investment in debentures (SFP) | 90,000,00 | ||
| Balance on Investment in debentures account: CU510,866,94 + CU66,565,96 – CU90,000 = CU487,432,90 | |||
| Bank (SFP) | 237,500,00 | ||
| Investment in debentures (SFP) | 237,500,00 | ||
| Balance on Investment in debentures account: CU487,432,90 – CU237,500 = CU249,932,90 | |||
| 2016 | |||
| 31/12 | Investment in debentures (SFP) | 32,566,26 | |
| Finance income (P or L) | 32,566,26 | ||
| CU249,932,90x 13,03% | |||
| 31/12 | Bank (SFP) | 45,000,00 | |
| Investment in debentures (SFP) | 45,000,00 | ||
| Balance on Investment in debentures account: CU249,932,90 + CU32,566,26 – CU45,000,00 = CU237,499,16 | |||
| Bank (SFP) | 237,500,00 | ||
| Investment in debentures (SFP) | 237,500,00 | ||
| Balance on Investment in debentures account: CU237,499,16 – CU237,500,00 = (R0,84) (rounding) | |||
2. General ledger of Jacobus Limited
