On January $1,2022,$ Cargo Airlines Inc. $($CAI$)($uses IFRS and has a December $31$ year$-$end$)$ issued $$5,000,000$ of $4\%$ bonds which pay interest on June $30$ and December $31,$ and mature on December $31,2027.$ The market rate of interest for similar bonds at time of issuance was $5\%$ and on December $31,2022$ the market rate of interest for similar bonds was $6\%.$

Scenario $1-$ Assume that CAI elected to subsequently measure the bonds at amortized cost.

Required:

$1)$ Prepare the journal entry to record the issuance of the bonds on January $1,2022$;

$2)$ Prepare the journal entry to record the payment of interest on June $30,2022$;

$3)$ Prepare the required journal entry on December $31,2022.$

Scenario $2-$ Assume that CAI elected to subsequently measure the bonds at fair value through profit or loss $($FVPL$)$ and that they only revalue FVPL obligations at year$-$end.

$1)$ Prepare the journal entry to record the issuance of the bonds on January $1,2022$;

$2)$ Prepare the journal entry to record the payment of interest on June $30,2022$;

$3)$ Prepare the required journal entry or entries on December $31,2022.$

Answer rating: 100% (QA)

Answer Scenario 1 Subsequent Measurement at Amortized Cost 1 Journal entry to record the issuance of ... View the full answer