On 1 Jan 2017, Entity A purchased a bond, Bond X, for $1,000,000 which is measured at amortised cost.Interest of 10% is payable in arrears.Repayment is due on 31 Dec 2019.The effective rate of interest is 10%.The 12-month expected credit loss is NIL.

On 31 Dec 2017, Entity A received interest of $100,000.However, based on a report from the credit department, Entity A estimated that Bond X is credit-impaired and no further interest will be received in the next two years and that only 50% of the redemption value will be repaid on 31 Dec 2019.Thus, the lifetime expected credit loss of Bond X is equivalent to the present values of the expected cash shortfalls after 31 Dec 2017.

1.1 Evaluate the lifetime expected credit loss of Bond X on 31 Dec 2017.

1.2 On 31 Dec 2017, Bond X was credit-impaired, evaluate the net carrying amount of Bond X on 31 Dec 2017.

1.3 Evaluate the interest income of Bond Xrecognised to Profit or Lossfor the year of 2018.