Required:

a)give entries for Bertum limited for the following four dates - may 1, 2017; november 1, 2017; the year end journal entries on december 31, 2017; and may 1, 2018.

b) assume instead that the investment is classified as FVTPL. describe differences in the JE required for the dates listed in part(a), assuming that the fair value of the bond was $900,000 on 31 december 2017. In describing the differences, provide new JE where required.

Transcribed Image Text:

On 1 May 2017, Bertrum Limited purchased $1,000,000 of Fox Corp. 7% coupon bonds (i.e., they pay $35,000 semi-annually), classified as an amortized cost investment. They paid $815,998 for the bonds. The bonds pay semi-annual interest each 1 May and 1 November with the first payment on 1 November 2017. The annual market interest rate was 12% on the date of purchase so you will use an effective rate of interest of 6% semi- annually. The bonds mature on 1 May 2022. On 1 May 2017, Bertrum Limited purchased $1,000,000 of Fox Corp. 7% coupon bonds (i.e., they pay $35,000 semi-annually), classified as an amortized cost investment. They paid $815,998 for the bonds. The bonds pay semi-annual interest each 1 May and 1 November with the first payment on 1 November 2017. The annual market interest rate was 12% on the date of purchase so you will use an effective rate of interest of 6% semi- annually. The bonds mature on 1 May 2022.

Answer rating: 100% (QA)

Answer a Date Accounts Debit Credit May 1 2017 Investment in bond 1000000 Discuont on purchase of bo... View the full answer