How much balances pertaining to the bond investment

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Question - On May 1, Bob Inc. (year-end is December 31) purchased XYZ Corp. 8.5% bonds with a face value of $444,000 at 96 plus accrued interest. Interest is payable on March 1 and September 1.

On October 31, XYZ Corp. bonds with a par value of $150,000 were sold at 106 plus accrued interest. On December 31, the fair values of XYZ Corp was 98.5.

Assume the investments are accounted for under the recognition and measurement requirements of IFRS 9 Financial Instruments.

Requirements -

a. Make all journal entries for Bob Inc during 2020 including December 31 year-end entries.

b. Calculate and explain how much balances pertaining to the bond investment and income accounts will be at the year-end.

It is assumed that the investment is accounted for held-for trading type and interest income is not reported separately from other related investment gains and losses.

Reference no: EM132786188

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