Question 4 Accounting for Financial Instruments - 14 Marks 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 ($200,000 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. Show all your workings. This question has four Parts. Answer Parts (a) to (d) in the spaces provided below: (a) Identify the present value or the fair value of the bond asset. (3 marks) (b) Determine whether Jack Ltd can measure the corporate bonds at amortised cost. (3 marks) (c) Calculate the amortised cost of the bonds as at 30 June 2023. (4 marks) (d) Provide the accounting journal entries for the years ending 30 June 2023. (4 marks) 55