On 1 July 2022, Jack Ltd acquired some corporate bonds issued by McCoy Ltd. They had...

  

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On 1 July 2022, Jack Ltd acquired some corporate bonds issued by McCoy Ltd. They had a 'face value of $2 million and offered a coupon rate of 10 % paid annually ($100,000 per year), paid on 30 June for next four years. The bonds would repay the principal of $2 million on 30 June 2026. At the time the market only required a rate of return on 8% on such bonds. Jack Ltd operates within a business model where corporate bonds are held in order to collect contractual cash flows and there is no intention to trade them. Assume that there were no initial direct costs incurred in obtaining the bonds. * NPV Tables are available for reference. Show all your workings. Question 3(a) 4 Marks) Required: Identify the present value or the fair value of the bond asset. Periods 3% 1 12 2 34 56700 8 9 10 11 12 13 14 15 16 17 18 19 20 Present Value of $1 Rate per period 7% 8% 4% 5% 9% 12% 10% 0.9091 11% 0.9009 0.9259 0.9174 0.8929 0.8573 0.8417 0.8264 0.8116 0.7972 0.7938 0.7513 0.7312 0.7118 0.6355 0.5674 0.5066 0.8131 0.4817 0.4523 0.7894 0.4039 0.3606 6% 0.9709 0.9615 0.9524 0.9434 0.9426 0.9246 0.9070 0.8900 0.9151 0.8890 0.8638 0.8396 0.8163 0.7722 0.8885 0.8548 0.8227 0.7921 0.7629 0.7350 0.7084 0.6830 0.6587 0.8626 0.8219 0.7835 0.7473 0.7130 0.6806 0.6499 0.6209 0.5935 0.8375 0.7903 0.7462 0.7050 0.6663 0.6302 0.5963 0.5645 0.5346 0.7599 0.7107 0.6651 0.6227 0.5835 0.5470 0.5132 0.7307 0.6768 0.6274 0.5820 0.5403 0.5019 0.4665 0.4339 0.7664 0.7026 0.6446 0.5919 0.5439 0.5002 0.4604 0.4241 0.3909 0.7441 0.6756 0.6139 0.5584 0.5083 0.4632 0.4224 0.3855 0.3522 0.7224 0.6496 0.5847 0.5268 0.4751 0.4289 0.3875 0.3505 0.3173 0.7014 0.6246 0.5568 0.4970 0.4440 0.3971 0.3555 0.3186 0.2858 0.2567 0.6810 0.6006 0.5303 0.4688 0.4150 0.3677 0.3262 0.2897 0.2575 0.2292 0.6611 0.5775 0.5051 0.4423 0.3878 0.3405 0.2992 0.2633 0.2320 0.6419 0.5553 0.4810 0.4173 0.3624 0.3152 0.2745 0.2394 0.2090 0.6232 0.5339 0.4581 0.3936 0.3387 0.2919 0.2519 0.6050 0.5134 0.4363 0.3714 0.3166 0.2703 0.2311 0.5874 0.4936 0.4155 0.3503 0.2959 0.2502 0.2120 0.5703 0.4746 0.3957 0.3305 0.2765 0.2317 0.5537 0.4564 0.3769 0.3118 0.2584 0.3220 0.2875 0.2176 0.1883 0.1978 0.1696 0.1799 0.1528 0.1945 0.1635 0.1377 0.2145 0.1784 0.1486 0.1240 0.9346 0.8734 0.2046 0.1827 0.1631 0.1456 0.1300 0.1161 0.1037 Periods 3% 123 4 5 678 c 9 10 11 12 13 14 15 16 17 18 19 20 Present Value of $1 Annuity Rate per period 6% 7% 8% 10% 11% 4% 0.9615 5% 0.9524 9% 0.9174 0.9091 0.9009 0.9709 1.7355 1.7125 2.4869 2.4437 0.9434 0.9346 0.9259 1.9135 1.8861 1.8594 1.8334 1.8080 1.7833 1.7591 2.8286 2.7751 2.7232 2.6730 2.6243 2.5771 2.5313 3.7171 3.6299 3.5460 3.4651 3.3872 3.3121 3.2397 3.1699 3.1024 4.5797 4.4518 4.3295 4.2124 4.1002 3.9927 3.8897 3.7908 3.6959 5.4172 5.2421 5.0757 4.9173 4.7665 4.6229 4.4859 4.3553 4.2305 6.2303 6.0021 5.7864 5.5824 5.3893 5.2064 5.0330 4.8684 4.7122 7.0197 6.7327 6.4632 6.2098 5.9713 5.7466 5.5348 7.7861 7.4353 7.1078 6.8017 6.5152 6.2469 5.9952 8.5302 8.1109 7.7217 7.3601 7.0236 6.7101 6.4177 9.2526 8.7605 8.3064 7.8869 7.4987 7.1390 9.3851 8.8633 8.3838 7.9427 7.5361 9.3936 8.8527 8.3577 7.9038 7.4869 9.8986 9.2950 8.7455 9.7122 5.3349 5.1461 5.7590 5.5370 6.1446 6.8052 6.4951 9.9540 7.1607 6.8137 7.1034 10.6350 9.9856 11.2961 10.5631 8.2442 7.7862 8.5595 11.9379 11.1184 10.3797 9.1079 9.4466 8.8514 8.3126 7.8237 7.3792 13.1661 12.1657 12.5611 11.6523 10.8378 10.1059 11.2741 10.4773 9.7632 9.1216 8.5436 8.0216 7.5488 13.7535 12.6593 11.6896 10.8276 10.0591 9.3719 8.7556 8.2014 7.7016 14.3238 13.1339 12.0853 11.1581 10.3356 9.6036 8.9501 8.3649 7.8393 14.8775 13.5903 12.4622 11.4699 10.5940 9.8181 9.1285 8.5136 7.9633 12% 0.8929 1.6901 2.4018 3.0373 3.6048 4.1114 4.5638 4.9676 5.3282 5.8892 5.6502 6.2065 5.9377 6.4924 6.1944 6.7499 7.3667 6.9819 8.0607 7.6061 7.1909 6.4235 6.6282 6.8109 6.9740 7.1196 7.2497 7.3658 7.4694 Question 3(b) (3 Marks) Determine whether Jack Ltd can measure the corporate bonds at amortised cost. DED B I B € St Question 3(c) (4 Marks) Required: Calculate the amortised cost of the bonds as at 30 June 2023. AB I III Enter your answer into the template below: Question 3(d) (5 Marks) Provide the accounting journal entries for the year ending 30 June 2023. AA BI Enter your Journal Entries into the template below. Show your workings underneath the Journal where indicated: Date Details Debit Credit On 1 July 2022, Jack Ltd acquired some corporate bonds issued by McCoy Ltd. They had a 'face value of $2 million and offered a coupon rate of 10 % paid annually ($100,000 per year), paid on 30 June for next four years. The bonds would repay the principal of $2 million on 30 June 2026. At the time the market only required a rate of return on 8% on such bonds. Jack Ltd operates within a business model where corporate bonds are held in order to collect contractual cash flows and there is no intention to trade them. Assume that there were no initial direct costs incurred in obtaining the bonds. * NPV Tables are available for reference. Show all your workings. Question 3(a) 4 Marks) Required: Identify the present value or the fair value of the bond asset. Periods 3% 1 12 2 34 56700 8 9 10 11 12 13 14 15 16 17 18 19 20 Present Value of $1 Rate per period 7% 8% 4% 5% 9% 12% 10% 0.9091 11% 0.9009 0.9259 0.9174 0.8929 0.8573 0.8417 0.8264 0.8116 0.7972 0.7938 0.7513 0.7312 0.7118 0.6355 0.5674 0.5066 0.8131 0.4817 0.4523 0.7894 0.4039 0.3606 6% 0.9709 0.9615 0.9524 0.9434 0.9426 0.9246 0.9070 0.8900 0.9151 0.8890 0.8638 0.8396 0.8163 0.7722 0.8885 0.8548 0.8227 0.7921 0.7629 0.7350 0.7084 0.6830 0.6587 0.8626 0.8219 0.7835 0.7473 0.7130 0.6806 0.6499 0.6209 0.5935 0.8375 0.7903 0.7462 0.7050 0.6663 0.6302 0.5963 0.5645 0.5346 0.7599 0.7107 0.6651 0.6227 0.5835 0.5470 0.5132 0.7307 0.6768 0.6274 0.5820 0.5403 0.5019 0.4665 0.4339 0.7664 0.7026 0.6446 0.5919 0.5439 0.5002 0.4604 0.4241 0.3909 0.7441 0.6756 0.6139 0.5584 0.5083 0.4632 0.4224 0.3855 0.3522 0.7224 0.6496 0.5847 0.5268 0.4751 0.4289 0.3875 0.3505 0.3173 0.7014 0.6246 0.5568 0.4970 0.4440 0.3971 0.3555 0.3186 0.2858 0.2567 0.6810 0.6006 0.5303 0.4688 0.4150 0.3677 0.3262 0.2897 0.2575 0.2292 0.6611 0.5775 0.5051 0.4423 0.3878 0.3405 0.2992 0.2633 0.2320 0.6419 0.5553 0.4810 0.4173 0.3624 0.3152 0.2745 0.2394 0.2090 0.6232 0.5339 0.4581 0.3936 0.3387 0.2919 0.2519 0.6050 0.5134 0.4363 0.3714 0.3166 0.2703 0.2311 0.5874 0.4936 0.4155 0.3503 0.2959 0.2502 0.2120 0.5703 0.4746 0.3957 0.3305 0.2765 0.2317 0.5537 0.4564 0.3769 0.3118 0.2584 0.3220 0.2875 0.2176 0.1883 0.1978 0.1696 0.1799 0.1528 0.1945 0.1635 0.1377 0.2145 0.1784 0.1486 0.1240 0.9346 0.8734 0.2046 0.1827 0.1631 0.1456 0.1300 0.1161 0.1037 Periods 3% 123 4 5 678 c 9 10 11 12 13 14 15 16 17 18 19 20 Present Value of $1 Annuity Rate per period 6% 7% 8% 10% 11% 4% 0.9615 5% 0.9524 9% 0.9174 0.9091 0.9009 0.9709 1.7355 1.7125 2.4869 2.4437 0.9434 0.9346 0.9259 1.9135 1.8861 1.8594 1.8334 1.8080 1.7833 1.7591 2.8286 2.7751 2.7232 2.6730 2.6243 2.5771 2.5313 3.7171 3.6299 3.5460 3.4651 3.3872 3.3121 3.2397 3.1699 3.1024 4.5797 4.4518 4.3295 4.2124 4.1002 3.9927 3.8897 3.7908 3.6959 5.4172 5.2421 5.0757 4.9173 4.7665 4.6229 4.4859 4.3553 4.2305 6.2303 6.0021 5.7864 5.5824 5.3893 5.2064 5.0330 4.8684 4.7122 7.0197 6.7327 6.4632 6.2098 5.9713 5.7466 5.5348 7.7861 7.4353 7.1078 6.8017 6.5152 6.2469 5.9952 8.5302 8.1109 7.7217 7.3601 7.0236 6.7101 6.4177 9.2526 8.7605 8.3064 7.8869 7.4987 7.1390 9.3851 8.8633 8.3838 7.9427 7.5361 9.3936 8.8527 8.3577 7.9038 7.4869 9.8986 9.2950 8.7455 9.7122 5.3349 5.1461 5.7590 5.5370 6.1446 6.8052 6.4951 9.9540 7.1607 6.8137 7.1034 10.6350 9.9856 11.2961 10.5631 8.2442 7.7862 8.5595 11.9379 11.1184 10.3797 9.1079 9.4466 8.8514 8.3126 7.8237 7.3792 13.1661 12.1657 12.5611 11.6523 10.8378 10.1059 11.2741 10.4773 9.7632 9.1216 8.5436 8.0216 7.5488 13.7535 12.6593 11.6896 10.8276 10.0591 9.3719 8.7556 8.2014 7.7016 14.3238 13.1339 12.0853 11.1581 10.3356 9.6036 8.9501 8.3649 7.8393 14.8775 13.5903 12.4622 11.4699 10.5940 9.8181 9.1285 8.5136 7.9633 12% 0.8929 1.6901 2.4018 3.0373 3.6048 4.1114 4.5638 4.9676 5.3282 5.8892 5.6502 6.2065 5.9377 6.4924 6.1944 6.7499 7.3667 6.9819 8.0607 7.6061 7.1909 6.4235 6.6282 6.8109 6.9740 7.1196 7.2497 7.3658 7.4694 Question 3(b) (3 Marks) Determine whether Jack Ltd can measure the corporate bonds at amortised cost. DED B I B € St Question 3(c) (4 Marks) Required: Calculate the amortised cost of the bonds as at 30 June 2023. AB I III Enter your answer into the template below: Question 3(d) (5 Marks) Provide the accounting journal entries for the year ending 30 June 2023. AA BI Enter your Journal Entries into the template below. Show your workings underneath the Journal where indicated: Date Details Debit Credit