Reference no: EM132903744

Question - Steph Corporation bought bonds with have a face amount of $5,000,000 on January 1, 2020. The company paid $4,600,000 plus transaction cost of $142,000 for the bond investment. The business model of the entity in managing the financial asset is to collect contractual cash flows that are solely payment of principal and interest and also to sell the bonds in the open market. The company has not elected the fair value option of measuring financial asset. The bonds will mature on December 31, 2022 and pay 6% interest annually on December 31 each year with 8% effective yield. The bonds are quoted at 105 on December 31, 2020 and 110 on December 31, 2021. The bonds are redeemed at face amount on December 31, 2022.

Using Original - FVOCI: What amount is the interest income to be recognized during 2021?

If the bonds are held as "Trading Securities" (FVPL): What amounts is the total income to be recognized in the Income Statement of 2021?

If the bonds are held as "FA at Amortized Cost" (FAAC): What amounts is the total income to be recognized in the Income Statement of 2021?

Mickaella Corporation acquired $6,000,000 of Janine Inc.'s 12% bonds on May 1, 2020 at 94 plus accrued interest to be held as financial asset at amortized cost. The bonds pay interest semiannually on February 1 and August 1, and mature on February 1, 2024. The fiscal period for Mickaella Corporation is the calendar period. Amortization is done following the straight line method. On May 1, 2022, Mickaella Corporation sold all the bonds at 105 plus accrued interest.

What amount is the total income to be recognized in the 2022 Income Statement?