Answer the following Question.

1. On January 1, 20X5, Grosbeak Industries Ltd. paid $31,590 to acquire $30,000 in bonds that mature in 10 years. The face value of the bonds is $30,000 and the bonds pay interest semi-annually at 7% per annum on June 30 and December 31. What is the effective rate of interest, per period, that Grosbeak is earning on its investment?

(a) 2.88%

(b) 3.14%

(c) 3.67%

(d) 6.52%

Use the following information to answer questions 2 to 4.

• Invest Corp. (IC) reports its financial statements in accordance with IFRS.
• IC's year end is June 30.
• IC rounds all percentages to two decimal places (for example, 8.98%).
• IC rounds all calculations to the nearest dollar.
• The investments listed below are IC's only investments in financial assets.
• On January 1, 20X6, IC purchased the following investments:

i. 100 shares in ABC at a cost of $10,000: IC classified this investment at fair value through profit or loss (FVPL). ABC declared dividends of $3.00 on June 25, 20X6, that are payable on July 5, 20X6.

ii. 200 shares in DEF at a cost of $30,000 paid to IC's investment dealer. IC irrevocably classified this investment at fair value through other comprehensive income (FVOCI-elect) at acquisition. DEF declared and paid dividends of $2.50 on June 30, 20X6.

iii. $20,000 of five-year, 5% bonds issued by CHI that pay interest semi-annually on June 30 and December 31 each year: IC paid $19,197 to its investment dealer to purchase these bonds, resulting in IC earning an effective interest rate, per period, of 2.97%, On acquisition, IC classified this investment at acquisition at fair value through other comprehensive income (FVOCI).

iv. $40,000 of five-year, 7% bonds issued by JKL that pay interest semi-annually on June 30 and December 31 each year: The market rate of interest for similar bonds is 6% payable semi-annually. IC paid $41,706 to its investment dealer to purchase these bonds and classified the investment at amortized cost.

On June 30, 20X6 the market value of IC's investments was as follows:

• ABC: $9,300
• DEF: $30,500
• GHI: $19,600
• JKL: $41,400

2. What is the total amount of investment income, including unrealized holding gains and losses, that IC reported in profit or loss on its statement of comprehensive income for its year ended June 30, 20X6?

(a) $1,621

(b) $1,921

(c) $2,000

(d) $2,754

3. What amount did IC report as investments on its statement of financial position as at June 30, 20X6?

(a) $100,624

(b) $100,800

(c) $100,903

(d) $100,957

4. On July 1, 20X6, IC reclassified the following investments:

• Investment in GHI from FVOCI to FVPL.
• Investment in JKL from amortized cost to FVOCI.

Note that July 1 is a national holiday, so the financial markets are closed. The fair market value of these investments remains unchanged from those indicated on June 30, 20X6.

What is the total gain that IC reported in profit or loss on its statement of comprehensive income for its year ended June 30, 20X71 due to reclassifying these investments?

(a) $176

(b) $246

(c) $333

(d) $403

5. On January 1, 20X6, Percy Co. bought 1,575 shares of Bowler Inc. for $36.50 per share. The company did not elect to classify the investment as fair value through other comprehensive income (FVOCI). During the 20X6 fiscal year, Bowler paid a dividend of $1.40 per share to its shareholders.

On December 31, 20X6, Bowler shares were trading for $38.60 per share.

What income will Percy report on its December 31, 20X6, statement of comprehensive income, due to its investment in shares of Bowler?

(a) $1,103

(b) $2,205

(c) $3,308

(d) $5,513

Answer rating: 100% (QA)

Financial Accounting 1 Bond price face value 31590 30000 1590 Bond period 10 years hence 159010 159 ... View the full answer