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What amount or amounts will europa report

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Problem 1: On January 3, 20X1,Europa, Ltd. invested $198,000 in 6% bonds with a face value of $300,000 that mature on December 31, 20X20 and pay interest annually on December 31 each year. The bond pays interest annually on December 31. Europa intends to hold the bond for the purpose of collecting the scheduled cash flows and expects to earn a 10% rate of return. At December 31, 20X1, the bonds had a fair value of $205,000. Europa prepares its financial statements in accordance with IFRS and did not elect to carry the investment at fair value through profit and loss. What amount or amounts will Europa report in its income statement for the year ended December 31, 20X1 and what will be the carrying value of the investment at December 31, 20X1?

A. Interest income of $18,000 and a gain of $7,000 with a carrying value of $205,000.

B. Interest income of $19,800 with a carrying value of $199,800.

C. Interest income of $19,800 and a gain of $5,200 with a carrying value of $205,000.

D. A gain of $7,000 with a carrying value of $205,000.

Reference no: EM132722213

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