On January 1, 2014, Morrill, Inc., purchased at par value a bond issued by a German company

Question:

On January 1, 2014, Morrill, Inc., purchased at a bond issued by a German company for 5,000 euros. Morrill classifies this security in its available-for-sale (AFS) portfolio. On December 31, 2014, the fair value of the bond is 4,800 euros. The applicable exchange rates are:
• January 1, 2014: $1.30 = 1 euro
• December 31, 2014: $1.40 = 1 euro

Required:
1. Prepare the January 1, 2014, and December 31, 2014, journal entries, assuming Morrill uses U.S. to account for the bond investment. Ignore fair value adjustments for other securities in Morrill’s AFS portfolio.
2. Repeat requirement 1 assuming Morrill uses IFRS.
3. Compare the effect on 2014 income and other comprehensive income (OCI) for U.S. and IFRS.

GAAP
Generally Accepted Accounting Principles (GAAP) is the accounting standard adopted by the U.S. Securities and Exchange Commission (SEC). While the SEC previously stated that it intends to move from U.S. GAAP to the International Financial Reporting Standards (IFRS), the... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...