Answer:
Explanation:
Available for sale are those investment whose purpose is to earn interest income for strategic time. gain and loss are recorded in other comprehensive income and at the time of disposal any gain on income recorded will be routed through profit and loss. Accounting is done as per IFRS-9.
Face Value = $400000
Coupon Rate = 8%
IRR = 10%
A) January 1, 2017
purchase Price = Face Value of bond i.e 400000
journal Entry
Investment in OCI 400000
Cash 400000
To record the invest in OCI.
B) Amortization Schedule
Date opening value IRR 10% CR 8% Closing Value Fair value
1-1-2017 400000 40000 32000 408,000 411,375
1-1-2018 411375 41,138 32000 420512 372726
C) journal Entries
30-6-2017
Cash/Receivable 16000
Interest Income 16000
To record the semi annual interest income
31-12-2017
Cash/Receivable 16000
Interest Income OCI 16000
To record the semi annual interest income
Investment in bond OCI 8000
Interest income OCI 8000
To record the invest in at Yield 10%
1-7-2018
Cash/Receivable 16000
Interest Income 16000
To record the semi annual interest income
31-12-2018
Cash/Receivable 16000
Interest Income OCI 16000
To record the semi annual interest income
Investment in bond OCI 9137
Interest income OCI 9137
To record the invest in at Yield 10%
D)
31-12-2017
Investment in OCi 3375
OCI 3375
To record the Debit increase in Investment due to fair valuation.
31-12-2018
OCI 47,786
Investment in bond OCI 47,786
To record the credit decrease in Investment due to fair valuation.
E) Disposal of investment
Cash 370726
Loss on Disposal 2000
Invest in bonds OCI 372726
To record the disposal of investment aviable for sale
