Question

In: Accounting

Presented below is an amortization schedule related to Stock Company’s 5-year, $200,000 bond with a 7%...

Presented below is an amortization schedule related to Stock Company’s 5-year, $200,000 bond with a 7% stated interest rate and a 5% market interest rate yield, purchased on December 31, 2017, for $217,320. The interest is paid each December 31, and the investor receives the first interest payment on Dec 31, 2018.

The following schedule presents the fair value of the bonds at year-end.

31.12.2018

31.12.2019

Fair value

213,000

215,000

Required:

  1. Prepare the journal entries related to bonds for 2017 and 2018 assuming the bonds are classified as financial assets at amortized cost.

  1. Prepare the journal entries related to the fair value adjustment for the bonds on 31 December 2019 assuming these bonds are classified as financial assets at fair value through profit or loss (FVTPL).

  1. Prepare the journal entries related to the fair value adjustment for 2018 and sale of bonds for 2019 assuming these bonds are classified as financial assets at fair value through other comprehensive income (FVTOCI). The bonds are sold at the fair value on 31 December 2019.

Part B:

Task Ltd. has the following transactions in purchasing and selling the ordinary shares of Sugar Company:

15. Jul. 2018          Purchased 12,000 shares of Sugar Company @ $100 per share.

31. Dec. 2018         The fair value of the ordinary shares of Sugar Company is $160 per share.

15. Jan. 2019         Sold the 4,000 ordinary shares of Sugar Company @ $150 per share.

Required:

Task Ltd. classifies the investment in the ordinary shares of Sugar Company as financial assets at fair value through other comprehensive income in accordance with HKFRS 9. Prepare journal entries for Task Ltd. to record the above transactions for 2018 and 2019.

Part C:

On 1 January 2018, Wet Co. acquired a loan investment of $1,600,000 with interest payable annual at 8%. The investment is measured at amortised cost.

At 1 January 2018, there is a 5% probability that the borrower will default on the loan during 2018 resulting in a 100% loss.

At 31 December 2018 there is 3% probability that the borrower will default on the loan before 31 December 2019 resulting in a 100% loss. There is no significant increase in the borrower’s credit risk during 2018.

Required:

In accordance with HKFRS 9, what impairment loss is recognised at initial recognition and on 31 December 2018?

Solutions

Expert Solution

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

Presented below is an amortization schedule related to Stock Company’s 5-year, $200,000 bond with a 7%...
Presented below is an amortization schedule related to Stock Company’s 5-year, $200,000 bond with a 7% stated interest rate and a 5% market interest rate yield, purchased on December 31, 2017, for $217,320. The interest is paid each December 31, and the investor receives the first interest payment on Dec 31, 2018. The following schedule presents the fair value of the bonds at year-end. 31.12.2018 31.12.2019 Fair value 213,000 215,000 Required: Prepare the journal entries related to bonds for 2017...
Presented below is an amortization schedule related to Riverbed Company’s 5-year, $140,000 bond with a 7%...
Presented below is an amortization schedule related to Riverbed Company’s 5-year, $140,000 bond with a 7% interest rate and a 5% yield, purchased on December 31, 2018, for $152,123. Date Cash Received Interest Revenue Bond Premium Amortization Carrying Amount of Bonds 12/31/18 $152,123 12/31/19 $9,800 $7,606 $2,194 149,929 12/31/20 9,800 7,496 2,304 147,625 12/31/21 9,800 7,381 2,419 145,206 12/31/22 9,800 7,260 2,540 142,666 12/31/23 9,800 7,134 2,666 140,000 The following schedule presents a comparison of the amortized cost and fair...
Presented below is an amortization schedule related to Mets Company’s 5-year, $100,000 bond with a 5%...
Presented below is an amortization schedule related to Mets Company’s 5-year, $100,000 bond with a 5% interest rate and a 6% yield, purchased on December 31, 2020, for $95,788. Carrying Interest Value of Date Cash Revenue Investment Investment 1/1/2021 95788 12/31/2021 5000 5747.27 747 96535 12/31/2022 5000 5792.10 792 97327 12/31/2023 5000 5839.63 840 98167 12/31/2024 5000 5890.01 890 99057 12/31/2025 5000 5943.41 943 100000 The following schedule presents a comparison of the amortized cost and fair value of the...
Presented below is an amortization schedule related to Cheyenne Company’s 5-year, $120,000 bond with a 6%...
Presented below is an amortization schedule related to Cheyenne Company’s 5-year, $120,000 bond with a 6% interest rate and a 3% yield, purchased on December 31, 2015, for $136,487. Date Cash Received Interest Revenue Bond Premium Amortization Carrying Amount of Bonds 12/31/15 $136,487 12/31/16 $7,200 $4,095 $3,105 133,382 12/31/17 7,200 4,001 3,199 130,183 12/31/18 7,200 3,905 3,295 126,888 12/31/19 7,200 3,807 3,393 123,495 12/31/20 7,200 3,705 3,495 120,000 The following schedule presents a comparison of the amortized cost and fair...
Presented below is an amortization schedule related to Tamarisk Company’s 5-year, $180,000 bond with a 6%...
Presented below is an amortization schedule related to Tamarisk Company’s 5-year, $180,000 bond with a 6% interest rate and a 3% yield, purchased on December 31, 2015, for $204,731. Date Cash Received Interest Revenue Bond Premium Amortization Carrying Amount of Bonds 12/31/15 $204,731 12/31/16 $10,800 $6,142 $4,658 200,073 12/31/17 10,800 6,002 4,798 195,275 12/31/18 10,800 5,858 4,942 190,333 12/31/19 10,800 5,710 5,090 185,243 12/31/20 10,800 5,557 5,243 180,000 The following schedule presents a comparison of the amortized cost and fair...
P17-1.   (Debt Securities) (LO 1) Presented below is an amortization schedule related to Spangler Company's 5-year,...
P17-1.   (Debt Securities) (LO 1) Presented below is an amortization schedule related to Spangler Company's 5-year, $100,000 bond with a 7% interest rate and a 5% yield, purchased on December 31, 2015, for $108,660. Date Cash Received Interest Revenue Bond Premium Amortization Carrying Amount of Bonds 12/31/15 $108,660 12/31/16 $7,000 $5,433 $1,567  107,093 12/31/17  7,000  5,354  1,646  105,447 12/31/18  7,000  5,272  1,728  103,719 12/31/19  7,000  5,186  1,814  101,905 12/31/20  7,000  5,095  1,905  100,000 The following schedule presents a comparison of...
Presented below is information taken from a bond investment amortization schedule with related fair values provided....
Presented below is information taken from a bond investment amortization schedule with related fair values provided. These bonds are classified as available-for-sale. 12/31/20 12/31/21 12/31/22 Amortized cost $457,200 $521,200 $526,600 Fair value $462,700 $510,000 $526,600 (a) Indicate whether the bonds were purchased at a discount or at a premium.                                                           DiscountPremium (b) Prepare the adjusting entry to record the bonds at fair...
Presented below is a partial amortization schedule for Discount Pizza.
Presented below is a partial amortization schedule for Discount Pizza. 1. Record the bond issue assuming the face amount of bonds payable is $70,000.2. Record the first interest payment.3. Explain why interest expense increases each period.
7. Construct a LOAN AMORTIZATION schedule for a 3 year 5% loan of $100, 000. Please...
7. Construct a LOAN AMORTIZATION schedule for a 3 year 5% loan of $100, 000. Please show your calculations clearly and include calculated answers in the table below. (Please only do this question if you are certain how to do it) Amortization Schedule for a Loan of $100 000 Repaid Over 3 Years at 5% Year Payment amount Interest Paid Principal repaid Outstanding loan balance 0 1 2 3
Problem 5-50 Amortization Schedule (LG9) Create the amortization schedule for a loan of $4,300, paid monthly...
Problem 5-50 Amortization Schedule (LG9) Create the amortization schedule for a loan of $4,300, paid monthly over two years using an 9 percent APR. (Round your answers to 2 decimal places.)       Month   Beginning Balance   Total Payment   Interest Paid   Principal Paid   Ending Balance 1                               2                               3                               4                               5                               6                               7  ...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT