Question
Cypress limited acquired a debt instrument with five year term at its market value (fair value) on 1 January 20*5 when the market interest rate
Cypress limited acquired a debt instrument with five year term at its market value (fair value) on 1 January 20*5 when the market interest rate on similar debt instruments was 5, 5 %. The instrument has a face value (principal amount) of R125 000 and carries fixed interest of 4.5 % paid annually on 31 December. The maturity date of this debt instrument is 31 December 20*6, when it will settle at face value. The debt instrument traded at 97, 2% at 31 December 20*6. Investments in debt instruments are measured at amortized cost in accordance with cypress Limiteds business mode Required Prepare the journal entries relating to the investment in the debt instrument in the records of cypress limited for the financial years which ended on 31December 20*6. Show how the investment in the debt instrument should be disclosed in the financial statements for the years ended 31 December 20*5 and 31 December 20*6
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