Clock Plc is a listed company. The following matter has been brought to the attention of the finance director as requiring attention before the financial statements can be finalised for the year ended 30 April 2015.

Clock Plc issued a bond on 1 May 2014. The terms of the bond are as follows:

Nominal value 40m

Issued for 22,336,000

Coupon rate 0%

Redemption date 30 April 2024

This is the first time that the company has issued debt in this way and the accounting staff have requested confirmation of the correct treatment.

Coincidentally, on 1 May 2014 Clock Plc paid 1,600,000 for a bond issued by Fridge Plc. That bond has a par value of 1,600,000 and a coupon rate, paid annually on 30 April, of 6%. The bond is redeemable at par on 30 April 2025. The market rate of interest for bonds issued by companies with Fridges credit rating was 6%.

Clock Plc intends to hold the bond until it matures.

By 30 April 2015 the interest rates had changed, and the market value of the Fridges bond was 1,385,280. Clock directors are unsure of the relevance of that fact.

Required:

Prepare the figures that will appear in Clocks financial statements for the year ended 30 April 2015 with respect to both the bond that it has issued and the bond that it holds against Fridge Plc. Explain your treatment of both bonds.