Question

On October 1, Bramble Ltd. purchased 7% bonds with a face value of $1,000 for trading purposes, accounting for the investment at FV-NI. The bonds were priced at 1.020 to yield Bramble 3%, and pay interest annually each October 1. Bramble has a December 31 year end, and at this date, the bonds' fair value was $1,055. Assume Bramble applies IFRS and follows a policy of not reporting interest income separately from other investment income. Prepare Bramble's journal entry for the purchase of the investment. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry"for the account titles and enter for the amounts.) Account Titles and Explanation Debit Credit e Textbook and Media List of Accounts Prepare Bramble's journal entry for the December 31 interest accrual. (Round answers to 2 decimal places, e.g. 52.75. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter for the amounts.) Account Titles and Explanation Debit Credit

Answer 1

Journal
Date	Particulars	Dr	Dr ($)	Cr ($)
1-Oct	Investment A/c	Dr	1,000
	To Bank A/c	Cr		1,000
	(Being 7% bonds purchased recorded at transacyion price at initial recognition as per IFRS 32)
31-Dec	Accrued Interest A/c	Dr	17.50
	To Interest Income A/c	Cr		17.50
	(Being interest accrued for 3 months @ 7% on 1000)
31-Dec	Investment A/c	Dr	55
	To Profit and Loss A/c			55
	(Being investments reported at fair Value at 31 Dec, assuming these are Financial Assets measured at Fair Value measured through P&L) (1055-1000)
31-Dec	Profit and Loss A/c	Dr	1,278.33
	To Investment A/c	Cr		1,278.33
	(Being investments reported at fair Value at 31 Dec, assuming these are Financial Assets measured at Fair Value measured through P&L) (2333.33-1055)

Interest Income on FV 1000	70.00
Yield %	3%
Fair Value using EIR	2,333.33
Initital recognition on 01 Oct	2,333.33
Subsequent measurement on 31 Dec	1,055.00
Decline in Fair Value	1,278.33