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On 1 January 2019, Martin Company purchased a 7-year bond issued by the Nelson Company...

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Accounting

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On 1 January 2019, Martin Company purchased a 7-year bond issued by the Nelson Company with a coupon interest rate of 3%. At the accounting year end of 2022, the accountant (Lawson) of Martin Company found that the Nelson Company's earning ability was very low because of the loss of a major customer. The bond interest payments in 2022 were not punctual. The cash flow statement of Nelson Company showed a deficit cash balance for the two consecutive years of 2021 and 2022. The effective interest rate used by Martin Company is 5%. Required: (8 marks) According to IFRS 9, explain how Lawson should deal with (i) the expected credit loss and (ii) the interest revenue in respect of the above mentioned bond investment held by Martin Company

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