Neco Model Questions Vol1 2019 Commerce Question 19

Practice objective / multiple choice question 19 from the 2019 Neco Model Questions Vol1 Commerce examination.

Neco Model Questions Vol1 2019 Commerce Objective / Multiple Choice Hard Difficulty
Question 19 NECO_MODEL_QUESTIONS_VOL1 • 2019 • COMMERCE • objective

A company issues a 3‑year loan note with a face value of \(\text{₦}1,200,000\). The note carries an annual coupon rate of 6 % payable at the end of each year, and the market effective interest rate at issuance is 8 %. The loan is therefore issued at a discount. Using the effective‑interest method, calculate (i) the interest expense recognised in the second year, and (ii) the carrying amount of the loan at the end of the second year. Round your answers to the nearest naira.

Answer Options

A. Interest expense: ₦88,450; Carrying amount: ₦1,185,600
Correct Answer B. Interest expense: ₦92,557; Carrying amount: ₦1,177,524
C. Interest expense: ₦95,200; Carrying amount: ₦1,172,300
D. Interest expense: ₦90,000; Carrying amount: ₦1,180,000
Correct Answer
B
Correct Option:
Interest expense: ₦92,557; Carrying amount: ₦1,177,524

About This Question

This is Neco Model Questions Vol1 2019 Commerce Question 19. It is one of the objective questions from the 2019 Neco Model Questions Vol1 Commerce examination.

Difficulty level: Hard .

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