On January 1, 2016, Ganges Marine Supplies purchased a Government of Canada bond at par for $5,000.
Question:
On January 1, 2016, Ganges Marine Supplies purchased a Government of Canada bond at par for $5,000. The bond has an interest rate of 4% and matures in three years. By December 31, 2016, market interest rates had increased such that the fair value of the bond decreased to $4,900. The fair value of the bond decreased further to $4,700 on December 31, 2017 (two years after purchase).
Required:
Assume that Ganges classified the investment as amortized cost.
a. At what value should Ganges report the bonds on its December 31, 2016, balance sheet?
b. How much income or loss should Ganges report in relation to this bond?
c. How much OCI should Ganges report in relation to this bond?
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a Ganges should report the bonds at amortized co...View the full answer
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