Exercise 9-6

The following information relates to the debt investments of Bramble Inc. during a recent year:

1.		On February 1, the company purchased Gibbons Corp. 10% bonds with a face value of $234,000 at 100 plus accrued interest. Interest is payable on April 1 and October 1.
2.		On April 1, semi-annual interest was received on the Gibbons bonds.
3.		On June 15, Sampson Inc. 9% bonds were purchased. The $156,000 par-value bonds were purchased at 100 plus accrued interest. Interest dates are June 1 and December 1.
4.		On August 31, Gibbons Corp. bonds with a par value of $46,800 purchased on February 1 were sold at 99 plus accrued interest.
5.		On October 1, semi-annual interest was received on the remaining Gibbons Corp. bonds.
6.		On December 1, semi-annual interest was received on the Sampson Inc. bonds.
7.		On December 31, the fair values of the bonds purchased on February 1 and June 15 were 98.5 and 101, respectively.

Assume the investments are accounted for under the recognition and measurement requirements of IFRS 9 Financial Instruments. The company does not record interest income separately from other investment income or loss when investments are accounted for at FV-NI

Prepare all journal entries that you consider necessary, including December 31 year-end entries, assuming these investments are accounted for at FV-NI.

A:

Prepare all journal entries that you consider necessary, including December 31 year-end entries, assuming these investments are accounted for at FV-NI.

B:

Assume instead that Bramble manages these investments based on their yield to maturity. Prepare all journal entries that you consider necessary, including December 31 adjusting entries.