QUESTION $3$

Lynott Limited purchased a five$-$year bond on $1$ January $2015$ at a cost of $10,000,000$ with

annual interest of $5\%,$ which is also the effective rate, payable on $31$ December annually. At the

reporting date of $31$ December $2015$ interest has been received as expected and the market rate

of interest is now $6\%.$

Requirement

$($a$)$ Show how the financial asset should be accounted for in the financial statements of Lynott

Limited for the year ended $31$ December $2015$ on the basis that it is classified:

$($i$)$ as fair value through profit or loss $($FVTPL$)$; and

$($ii$)$ to be measured at amortised cost, on the assumption it passes the necessary tests

and has been properly designated at initial recognition.

Answer these questions:

For part $($a$)($i$)$:

What is the value of the financial instrument in the financial statements of Lynott Limited at $31$

December $2015?$

A$.$ Enil

B$.10,000,000$

C$.9,653,550$

D$.8,317,050$

For part $($a$)($ii$)$:

What is the value of the financial instrument in the financial statements of Lynott Limited at $31$

December $2015?$

A$.$nil

B$.10,000,000$

C$.8,638,350$

D$.500,000$