Function: PV; Formulas: Subtract, Multiply. Cell Referencing

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Using Excel to Account for Bond Investments Using the Effective Interest Method under IFRS $($parts a$,$ b$,$ and f$)$ Student Work Area

Required: Provide input into cells shaded in yellow in this template. Input the required mathematical formulas or functions with cell references to the Problem area or work area as indicated.

PROBLEM

Lai Corp. invested in a three$-$year bond that pays interest annually.

Face value of bond investment $$100\mathrm{.}00$ a$."$ Prepare a bond premium amortization table for Lai, assuming Lai uses the effective interest method required by IFRS. $"$

Cash paid to acquire bond $102\mathrm{.}72$

Bond term in years $3$

Bond face rate $6\%$ Date Cash Received Interest Income Bond Amortization Amortized Cost of Bond

Bond yield $5\%$

Day $1$ $$102\mathrm{.}72$

End Year $1$ $$6\mathrm{.}00$ $$5\mathrm{.}14$ $$0\mathrm{.}86101\mathrm{.}86$

End Year $26\mathrm{.}00$ $$5\mathrm{.}090\mathrm{.}91100\mathrm{.}95$

End Year $36\mathrm{.}005\mathrm{.}050\mathrm{.}95100\mathrm{.}00$

b$.$ Prepare journal entries to record the initial investment, receipt of interest, and recognition of interest income in each of the three years, and the maturity of the bond at the end of the third year.

Debit Credit

Bond Investment at Fair Value $102\mathrm{.}72$

Cash $102\mathrm{.}72$

End of Year $1$

Cash $6\mathrm{.}00$

Interest Income $5\mathrm{.}14$

Bond Investment at Amortized Cost $0\mathrm{.}86$

End of Year $2$

Cash $6\mathrm{.}00$

Interest Income $5\mathrm{.}09$

Bond Investment at Amortized Cost $0\mathrm{.}91$

End of Year $3$

Cash $6\mathrm{.}00$

Interest Income $5\mathrm{.}05$

Bond Investment at Amortized Cost $0\mathrm{.}95$

$($To record interest collected$)$

Cash $100\mathrm{.}00$

Bond Investment at Amortized Cost $100\mathrm{.}00$

$($To record maturity of bond investment$)$

f$.$ Determine the present value of the bond using the NPV formula.

Present value of the bond $$102\mathrm{.}72$