90.2K

Verified Solution

Link Copied!

58 points Seven QUESTION Ently A is a listed company in Hong Kong for more than 20 years. Its business mainly focuses on the food industry On 1 January 2016 Entity A invested in a bond with a face value of 57 350.000 and pays a fixed interest of 6 80% for the first two years, then 9 25 fixed interest for the last two years. The far value of the band is 57.650.000 and the transaction cost for purchasing the bond is $59.456. Ently A made the payment to the issvar for the purchase of the bond by cheque. The bond was planned to hold undi maturity. The fair value option in malsortent was not adopted interest is paid in arrears annually. The bond will be redeemed at a premium of 5 aer years. The effective rate for this bond is 1300% The 12-month expected credit loss and forme expected credit loss was initially estimated at $20 250 and $61 so respectively On 31 Decembar 2016, there was no significant change in credit risk. The 12-month expected credit loss and lifetime expected credit loss was estimated at 1900 and 555.000 respectively On 31 December 2017. it became apparent that the issuer suttered financial difficulties. After communicating with the issuer, it was estimated that Entity will only receive expected contractual cash flows of os fed interests and 75% redemption value in the future. The bond has become creditimpaired On 31 December 2016 and 31 December 2019. there was NO further deterioration in credit risk. The expected contractual cash flows of fixed interests and redemption value in the Year 2018 and Year 2019 were well received from the issue on time Entity Abelieved that no further credit loss would be applied in these 2 years The end of the reporting period is 31 December REQUIRED: According to relevant accounting standards, prepare youmat entries to recognise the transactions of Ently Atrom January 2016 to 31 December 2018 ACCOUNTS FOR INPUT Financial asset Amortised Cost) Financial asset (FVTPL) Financial asset (FVTOCH Financial liability Equity insuntent Transaction cost Bank 1 Loss allowance impairment loss | Reversal of impairment loss Gain on romeasurement (PL) Loss on romeasurement (PL) Gain on romeasurement (OCH I Loss on romeasurement (OCI) Payable Receivabilo Oher income other expense Reclassification (PL) Reclassification (CI) Interest experiences en Loss on disposal Gain on disposal Retained earnings No entry ANSWERS Journal Entries: Date Account Name De 151 Credit 159 Hints For Sequence 1Jan 16 1.16 Judge DC Only Entor Amount 31-Dec-16 An Annat Judge Dr Only Entor Amout 31.Dec.16 Judge Dy/C Only Enter Amount 31-Dec-17 Judge Drice Only Enter Amount Not an Asset 31-Dec-17 Judge Duc Only Enter Amount An Asset udge Dr C Only Enter Amount 9 31-04-10 Judge Dice Only Enter Amount Not an Asset 31-Dec-18 31-Dec-19 An Asset Judge UniCr Only Enter Amount 31-Dec-19 Judge Drir Only Enter Amount

Answer & Explanation Solved by verified expert

See Answer