DE purchased a bond with a par value of $5 million on 1 July 20X3. The bond carries a 5% coupon, payable annually in arrears and is redeemable on 30 June 20X8 at $5.8 million. The bond was purchased at a 10% discount. The effective interest rate on the bond is 10.26%. The objective of DE's business model is to hold this bond in order to collect the contractual cash flows which are solely payments of principal and interest. What is the carrying amount of the financial instrument at 30 June 20X4 and how much finance cost or income should be reported in profit or loss for the year?

Answer rating: 100% (QA)

To determine the carrying amount of the financial instrument at 30 June 20X4 and the finance cost or ... View the full answer