On October 1, Qilan Ltd. purchased 7% bonds with a face value of S1,OOO for trading purposes,

Question:

On October 1, Qilan Ltd. purchased 7% bonds with a of S1,OOO for trading purposes, accounting for the investment at fair value through net income. The bonds were priced at 1.044 to yield Qilan 6%, and pay interest annually each October 1. Qilan has a December 31 year end, and at this date, the bonds' fair value was $1,055. Assuming Qilan applies IFRS and follows a policy of not reporting interest income separately from other investment income, prepare Qilans journal entries for
(a) The purchase of the investment,
(b) The December 31 interest accrual, and
(c) The year-end fair value adjustment. Assuming Qilan applies ASPE, uses the effective interest method, and follows a policy of reporting interest income separately, prepare Qilan's journal entries for
(d) The December 31 interest accrual, and
(e) The year-end fair value adjustment. Round amounts to two decimal places.
Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...