DanKay Ltd bought a ten-year bond on 1 August 2016 at a cost of GH45 million. The
Question:
DanKay Ltd bought a ten-year bond on 1 August 2016 at a cost of GH¢45 million. The bond carries an interest coupon of GH¢5 million paid annually in arrears, and its effective yield to maturity was 12% at the date of purchase. Dankay Ltd is holding the bond as a speculative investment, expecting its value to increase, and hopes to sell the bond at a profit in the short to medium term. On 31 July 2017, its reporting date, the fair value of the bond had declined to GH¢43 million. The interest payment was received as scheduled.
Required:
Advise DanKay Ltd on the treatment of the above in the financial statements for the year ended 31 July 2017 in accordance with IFRS 9: Financial Instruments.
Accounting
ISBN: 978-1118608227
9th edition
Authors: Lew Edwards, John Medlin, Keryn Chalmers, Andreas Hellmann, Claire Beattie, Jodie Maxfield, John Hoggett