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Prepare journal entries required to record the investment

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Reference no: EM133034933

Question - Gums Ltd acquired 10 000 8% bonds (with a par value of N$100 each) at 102% (at a 2% premium) on 1 January. These 5 year bonds will be redeemed at 110% (at a 10% premium). Interest on the bonds is payable annually on 31 December. Assume no transaction costs.

Gums intend to hold the bond to collect the contractual cash flows as opposed to being held for short term profit making.

The bonds traded on the stock exchange at 103,5% on 30 December 2020.

Required - Prepare the journal entries required to record the investment in the bonds in the general ledger of Gums Ltd for the year ended 30 December 2020. Ignore taxation. Narrations are not required.

Reference no: EM133034933

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