Luke Corporation purchased $ 60,400 of 6-year, 7% bonds of Reed Inc. for $ 57,566 to yield an 8% return, and classified the purchase as an amortized cost method investment. The bonds pay interest semi-annually.

Instructions

a) Assuming Luke Corporation applies IFRS, prepare its journal entries for the purchase of the investment and receipt of semi-annual interest and discount amortization for the first two interest payments that will be received.

b) Assuming Luke Corporation applies ASPE and has chosen the straight-line method of discount amortization, prepare the same three entries requested in part a).