Question

Presented below is selected information related to the financial instruments of Sweet Company at December 31, 2020. This is Sweet Company's first year of operations. Investment in debt securities (intent is to hold to maturity) Investment in Chen Company stock Bonds payable Carrying Fair Value Amount (at December 31) $41,800 $42,700 784,000 893,200 234.900 210,900 (a) Sweet elects to use the fair value option for these investments. Assuming that Sweet's net income is $93,500 in 2020 before reporting any securities gains or losses, determine Sweet's net income for 2020. Assume that the difference between the carrying value and fair value is due to credit deterioration. Sweet's net income for 2020 $ (b) Record the journal entry, if any, necessary at December 31, 2020, to record the fair value option for the bonds payable. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Date Account Titles and Explanation Debit Credit Dec 31, 2020 Bonds Payable 24000 Loss on Impairment 24000

Answer 1

Sweet Company at Dec - belowOption
	Carrying Amt($)	Fair Value (Dec 31)
Investment in Debt Securities	41,800	42,700
Investment in Chen Company Stock	7,84,000	8,93,200
Bonds Payable	2,34,900	2,10,900
Above detail we need to determined Fair Value movement as per IFRS 9
As per IFRS9 , We need to find out position of Investment , whether
It is Hold till Maturiy ( HTM), trading Purpose or available for Sale
On the basis of above disclosure , difference , we need to classified like
AMC , FVOCI , FVTPL
Now determied Fair Value - Between difference between Carrying Amount VS Fair Value Method
	Carrying Amt($)	Fair Value (Dec 31)$	Difference$	Remarks
Investment in Debt Securities	41,800	42,700	900	Change in Fair Value - Treated as HTM , adjust in Carrying amount
Investment in Chen Company Stock	7,84,000	8,93,200	1,09,200	Change in Fair Value - adjust in Carrying amount
Bonds Payable	2,34,900	2,10,900	24,000	Change in Fair Value - Bonds payable , carrying amount higher than Fair value
Total movement of Fair value			1,34,100
	Amnt($)
Sweet Net Income $	93,500
Add - above - change in Fair value	1,34,100
Sweet Net Income 2020	2,27,600
Journal Entry in relates to Bond Fair valu movement
Details	Debit($)	Credit($)
Bonds Payable	24,000
Profit / loss account		24,000
Change in Fair Value - Bonds payable , carrying amount higher than Fair value