Question
On 1 July 2018, Donald Ltd acquired some corporate bonds issued by Trump Ltd. These bonds cost Donald Ltd $2,132,485. They had a face value
On 1 July 2018, Donald Ltd acquired some corporate bonds issued by Trump Ltd. These bonds cost Donald Ltd $2,132,485. They had a face value of $2 million and offered a coupon rate of 10 per cent paid annually ($200,000 per year, paid each 30 June). The bonds will repay the principal of $2 million on 30 June 2022. At the time the market only required a rate of return of 8 per cent on such bonds. Assume zero transaction costs.
Donald operates within a business model where corporate bonds are held in order to collect contractual cash flows and there is no intention to trade the bonds.
What is the interest revenue for the year ended 30 June 2019 and the amortised cost of the bonds at 30 June 2019?
Select one:
a.
Interest revenue | Amortised cost of bonds |
$200,000 | $2,132,485 |
b.
Interest revenue | Amortised cost of bonds |
$170,599 | $2,103,084 |
c.
Interest revenue | Amortised cost of bonds |
$200,000 | $2,000,000 |
d.
Interest revenue | Amortised cost of bonds |
$170,599 | $2,132,484 |
e.
Interest revenue | Amortised cost of bonds |
$29,402 | $2,103,084 |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started