BA Limited is a company based in Melbourne, Australia. The year end is 30^th June.

On 1 July 2019, BA Ltd acquired a 3 year fixed rate corporate bond which has been classified as amortised cost under IFRS 9 Financial Instruments. BA Ltd acquired the corporate bond for $480,000 and incurred $2,000 in transaction costs for the investment.

Details of the corporate bond are as follows:

Face value $500,000; Annual coupon rate 6% paid on 30^th June each year

Effective interest rate 7.3813%; Maturity date 30 June 2022.

The bond is not a designated hedge instrument.

Instead, holding the bond until its maturity date ( 30 June 2022). BA Ltd decided to sell the bond earlier to obtain the cash needed to invest in a new project. On 30 June 2021, BA Ltd received the annual coupon on the bond and then immediately sold the bond for $495,000.

TASK:

For the bond for the year ended 30 June 2021

1. Prepare the journal entries to account for the bond. Show all workings.

Ignore the impact of tax.

(9 Marks)

2. Determine which inflows or outflows will appear in the statement of cash flows. Ensure your response includes both amounts and classification.

(6 Marks)

Please provide your answer to Question 4 a) in the space below (please use as much space as needed to answer the question):

Answer 4 a): [9 Marks] General Journal

Date	Account name	Debit $	Credit $

Answer 4 a): workings

Date	Opening Balance	Principal	Coupon	Interest revenue at effective interest rate	Closing Balance

Please provide your answer to Question 4 b) in the space below (please use as much space as needed to answer the question):

Answer 4 b) (6 Marks) Statement of cashflows