Small Ltd acquired a portfolio of corporate bonds on 1 July 2019. The bonds will generate contractual cash flows that are solely principal and interest. Small Ltd intends to collect contractual cash flows and also sell the bonds within the next few years. The face value of these bonds: $8,000,000 Coupon paid in arrears annually at the rate of: 7% The bonds will mature in (years): 10 The effective interest rate of the bonds: 9% On 30 June 2020, the fair value of the corporate bonds was $8,000,000 Which of the following is/are true on 30 June 2020 (rounded to the nearest thousand dollars)? Select one or more: O a. The bonds are classified as fair value to OCI O b. A gain needs to be recognised in other comprehensive income for $959,000 O c. The effective interest rate becomes 7%, same as the coupon rate O d. A gain needs to be recognised in profit and loss for $959,000 O e. The fair value of the bonds based on amortised cost at 9% initial rate was $7,041,000 O f. A gain needs to be recognised in other comprehensive income for $628,000 O g. A loss needs to be recognised in profit and loss for $1,027,000 O h. A gain needs to be recognised in profit and loss for $628,000
Small Ltd acquired a portfolio of corporate bonds on 1 July 2019. The bonds will generate contractual cash flows that are solely principal and interest. Small Ltd intends to collect contractual cash flows and also sell the bonds within the next few years. The face value of these bonds: $8,000,000 Coupon paid in arrears annually at the rate of: 7% The bonds will mature in (years): 10 The effective interest rate of the bonds: 9% On 30 June 2020, the fair value of the corporate bonds was $8,000,000 Which of the following is/are true on 30 June 2020 (rounded to the nearest thousand dollars)? Select one or more: O a. The bonds are classified as fair value to OCI O b. A gain needs to be recognised in other comprehensive income for $959,000 O c. The effective interest rate becomes 7%, same as the coupon rate O d. A gain needs to be recognised in profit and loss for $959,000 O e. The fair value of the bonds based on amortised cost at 9% initial rate was $7,041,000 O f. A gain needs to be recognised in other comprehensive income for $628,000 O g. A loss needs to be recognised in profit and loss for $1,027,000 O h. A gain needs to be recognised in profit and loss for $628,000
Chapter13: Long-term Liabilities
Section: Chapter Questions
Problem 5PA: Volunteer Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July...
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