Question
On 1 January 2018, Sydney Ltd purchased a debt instrument with a remaining 3-year term for cash consideration of $1,640,123 (including transaction costs). The instrument
On 1 January 2018, Sydney Ltd purchased a debt instrument with a remaining 3-year term for cash consideration of $1,640,123 (including transaction costs). The instrument had a principal amount of $1,900,000 (the amount payable on redemption) and interest coupon of 4.5% distributed at the end of each calendar year. The effective interest rate was 10%. The debt instrument is classified as subsequent measurement at amortised cost.
Requirement:
Prepare the journal entries of Sydney Ltd for the initial and subsequent measurement of the debt instrument. Show all workings. | (6 marks) |
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