QUESTION 2 (29 marks) Buildit (Pty) Ltd is a retail company specialising in items such as electrical appliances, tools and machinery, paint, and adhesives. The company has a 31 December financial year-end. Due to the economic downturn, Buildit (Pty) Ltd does not foresee any viable business projects to invest in and, for this reason, any excess cash is to be invested. The company has decided to invest in government bonds. The details of the govern- ment bonds are as follows: The government bond portfolio is held to earn contractual cashflows where the contractual cashflows comprise a return of the capital amount and interest on the capital. Government bond portfolio details: Purchase price on 1 January 2019 (acquisition date) R800 000 Transaction costs incurred on 1 January 2019 R65 000 Date of maturity 31 December 2023 Coupon payment (payable in arrears annually on 31 December) R80 000 Redemption amount R1 000 000 The related cashflows took place on their respective due dates. The purchase price on the acquisition date was equal to its fair value on 1 Jan- uary 2019.

REQUIRED: 2.1) Discuss fully how the government bonds should be classified and measured in terms of IFRS 9. Note: No definitions are required. Apply the definitions to the scenario. (9 marks) 2.2) Prepare all the general journal entries relating to the government bonds in the records of Buildit (Pty) Ltd for the year ended 31 December 2023. The general journal date(s) are required. Narrations are not required. Ignore all taxation. Show all calculations and round to the nearest rand where applicable. (20 marks)