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On 1 January 2020, Alina Ltd purchased a portfolio of short-term bonds for liquidity purposes for cash consideration of $400,000 including transaction costs. The objective
On 1 January 2020, Alina Ltd purchased a portfolio of short-term bonds for liquidity purposes for cash consideration of $400,000 including transaction costs. The objective of this liquidity portfolio is to receive contractual cash flows and may also SELL the bonds BEFORE the expiry of contract if extra cash is required in the business. Therefore, Alina Ltd can measure the liquidity portfolio at Fair value through OCI. During the year the liquidity portfolio has earned and received $30,000 in interest income. On balance date 31 December 2020, the fair value of the liquidity portfolio is determined to be $380,000. In accordance with NZ IFRS 9, required: (a) Prepare the journal entry for the initial recognition of the bonds on 1 January 2020. (b) Prepare the journal entries for the subsequent measurement of the bonds for the year ending 31 December 2020. (c) Show the impact on financial statements by disclosing the financial asset, related income, gain or loss on fair value (if any) on the financial statements for the year ending 31 December 2020
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