Page 16 - 35. FR APRIL 22 MTP QP ANSWERS

Calculation of amortised cost of loan to employees

Financial year Amortised cost Interest to be Repayment Amortised cost
Ending on (opening balance) recognize @ (including (closing
10% interest) balance)
31st March
20X2 13,54,602 1,35,460 3,90,000 11,00,062
20X3 11,00,062 1,10,006 3,72,000 8,38,068

20X4 8,38,068 83,807 3,54,000 5,67,875
20X5 5,67,875 56,788 3,36,000 2,88,663
20X6 2,88,663 29,337* 3,18,000 -

* 2,88,663 x 10% = ` 28,866. Difference of ` 471 (29,337 – 28,866) is due to approximation in
computation.

Journal Entries to be recorded at every period end
1. On 1st April, 20X1

Particulars Dr. Amount (`) Cr. Amount (`)
Loan to employee A/c Dr. 13,54,602
Prepaid employee cost A/c Dr. 1,45,398

To Bank A/c 15,00,000
(Being loan asset recorded at initial fair value)

2. On 31st March, 20X2

Particulars Dr. Amount Cr. Amount
(`) (`)
Bank A/c Dr. 3,90,000

To Finance income A/c (profit and loss) @10% 1,35,460
To Loan to employee A/c 2,54,540
(Being first instalment of repayment of loan
accounted for using the amortised cost and effective
interest rate @ 10%)
Employee benefit cost (profit and loss) A/c Dr. 29,080

To Prepaid employee cost A/c (1,45,398/5) 29,080
(Being amortization of pre-paid employee cost
charged to profit and loss as employee benefit cost)
The following housing loan balances should appear in the financial statements:

Extracts of Balance Sheet of Star Ltd. as at 31st March, 20X2

Non-current asset
Financial asset
Loan to employee (11,00,062 – 3,72,000 + 1,10,006) 8,38,068

Other non-current asset
Prepaid employee cost 87,238
Current asset
Financial asset

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