On 3 September 2022, Debussy Ltd purchase 40,000 $1 listed equity shares of Red Copper Ltd...

   

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On 3 September 2022, Debussy Ltd purchase 40,000 $1 listed equity shares of Red Copper Ltd at a price of $3 per share. Transaction costs were $5,000. At the year-end of 30 June 2023, these shares were trading at $3.50. Debussy Ltd holds an active trading portfolio and the shares in Red Copper Ltd are acquired principally for the purpose of short-term profit. Required: Provide necessary journal entries to account for initial and subsequent measurement of the share investment in Red Copper Ltd, in accordance with IFRS 9 /AASB 9 Financial Instruments (narrations are not required). (b) Star Ltd issued 1 million convertible bonds on 1 July 2022. The bonds had a term of three years and were issued with a total fair value of $1 million which is also the par value. Interest is paid annually in arrears at a rate of 6% per annum. The holders are entitled to convert each $1,000 bonds at the par value into 200 ordinary shares of Star Ltd at contract maturity. Bonds without the conversion option attracted an interest rate of 9% per annum on 1 July 2022. Other information: Years 3 4 PV of an annuity of $1 6% 9% 2.5313 3.2397 2.6730 3.4651 Years 3 4 PV of $1 6% 0.8396 0.7921 9% 0.7722 0.7084 Required (rounded to the nearest dollar): Provide appropriate journal entries to record: (1) the issue of the convertible bonds on 1 July 2022 (2) the payment of convertible bond interest on 30 June 2023 (3) the redemption of all convertible bonds on 30 June 2025 if not converted into ordinary shares (Narrations are not required). Answer here: (a) Date 3 Sept 30/6 Account Name Debit Credit (b) Date (1) the issue of the convertible bonds on 1 July 2022 Account Name (2) the payment of convertible bond interest on 30 June 2023 Debit (3) the redemption of all convertible bonds on 30 June 2025 if not converted into ordinary shares Credit On 3 September 2022, Debussy Ltd purchase 40,000 $1 listed equity shares of Red Copper Ltd at a price of $3 per share. Transaction costs were $5,000. At the year-end of 30 June 2023, these shares were trading at $3.50. Debussy Ltd holds an active trading portfolio and the shares in Red Copper Ltd are acquired principally for the purpose of short-term profit. Required: Provide necessary journal entries to account for initial and subsequent measurement of the share investment in Red Copper Ltd, in accordance with IFRS 9 /AASB 9 Financial Instruments (narrations are not required). (b) Star Ltd issued 1 million convertible bonds on 1 July 2022. The bonds had a term of three years and were issued with a total fair value of $1 million which is also the par value. Interest is paid annually in arrears at a rate of 6% per annum. The holders are entitled to convert each $1,000 bonds at the par value into 200 ordinary shares of Star Ltd at contract maturity. Bonds without the conversion option attracted an interest rate of 9% per annum on 1 July 2022. Other information: Years 3 4 PV of an annuity of $1 6% 9% 2.5313 3.2397 2.6730 3.4651 Years 3 4 PV of $1 6% 0.8396 0.7921 9% 0.7722 0.7084 Required (rounded to the nearest dollar): Provide appropriate journal entries to record: (1) the issue of the convertible bonds on 1 July 2022 (2) the payment of convertible bond interest on 30 June 2023 (3) the redemption of all convertible bonds on 30 June 2025 if not converted into ordinary shares (Narrations are not required). Answer here: (a) Date 3 Sept 30/6 Account Name Debit Credit (b) Date (1) the issue of the convertible bonds on 1 July 2022 Account Name (2) the payment of convertible bond interest on 30 June 2023 Debit (3) the redemption of all convertible bonds on 30 June 2025 if not converted into ordinary shares Credit

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a Purchase of Red Copper Ltd Shares Initial investment cost 40000 shares 3 per share 120000 Transact... View the full answer