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What amount of gain or loss should be recognized in profit

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On April 30, CHIA-SEED Company issued 7,000 of 15% ?1,000 bonds at 95. The bonds have a five-year term and interest is payable semi-annually, May 1 and November 1. The entity elected the fair value option. The entity paid bond issue cost of ?125,000. On December 31, 2021, the fair value of the bonds is 104. It is reliably determined that the fair value increase comprised of 25% attributable to credit risk and the remainder is attributable to change in market interest rate.

Problem 1: What is the interest expense for the year ended December 31, 2021?

Problem 2: What amount of gain or loss should be recognized in profit or loss for 2021 to conform with the fair value option?

Reference no: EM133000027

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