On 1 July 2022, Jack Ltd acquired some corporate bonds issued by McCoy Ltd. They had a 'face value of $2 million and offered a coupon rate of 10% paid annually ($100,000 per year), paid on 30 June for next four years. The bonds would repay the principal of $2 million on 30 June 2026. At the time the market only required a rate of return on 8% on such bonds. Jack Ltd operates within a business model where corporate bonds are held in order to collect contractual cash flows and there is no intention to trade them. Assume that there were no initial direct costs incurred in obtaining the bonds. * NPV Tables are available for reference. Show all your workings. Question 3(a) 4 Marks) Required: Identify the present value or the fair value of the bond asset. BI to !!! Present Value of $1 Periods 6% 1 4% 0.9615 0.9246 0.8890 5% 0.9524 0.9070 0.9434 0.8900 10% 0.9091 0.8264 0.7513 12% 0.8929 0.7972 2 3 0.8638 0.7118 4 0.8548 0.6830 5 6 7 0.8227 0.7835 0.7462 0.7107 0.6768 0.6446 0.6139 0.5847 8 9 3% 0.9709 0.9426 0.9151 0.8885 0.8626 0.8375 0.8131 0.7894 0.7664 0.7441 0.7224 0.7014 0.6810 0.6611 0.6419 0.6232 0.6050 0.5874 0.5703 0.5537 10 Rate per period 7% 8% 0.9346 0.9259 0.8734 0.8573 0.8163 0.7938 0.7629 0.7350 0.7130 0.6806 0.6663 0.6302 0.6227 0.5835 0.5820 0.5403 0.5439 0.5002 0.5083 0.4632 0.4751 0.4289 0.4440 0.3971 0.4150 0.3677 0.3878 0.3405 0.3624 0.3152 0.3387 0.2919 0.3166 0.2703 0.2959 0.2502 0.2765 0.2317 0.2584 0.2145 0.8396 0.7921 0.7473 0.7050 0.6651 0.6274 0.5919 0.5584 0.5268 0.4970 0.4688 0.4423 0.4173 0.3936 0.3714 0.3503 0.3305 0.3118 9% 0.9174 0.8417 0.7722 0.7084 0.6499 0.5963 0.5470 0.5019 0.4604 0.4224 0.3875 0.3555 0.3262 0.2992 0.2745 0.2519 0.2311 0.2120 0.1945 0.1784 0.8219 0.7903 0.7599 0.7307 0.7026 0.6756 0.6496 0.6246 0.6006 0.5775 0.5553 0.5339 0.5134 0.4936 0.4746 0.4564 0.6209 0.5645 0.5132 0.4665 0.4241 0.3855 0.3505 0.3186 0.2897 11 11% 0.9009 0.8116 0.7312 0.6587 0.5935 0.5346 0.4817 0.4339 0.3909 0.3522 0.3173 0.2858 0.2575 0.2320 0.2090 0.1883 0.1696 0.1528 0.1377 0.1240 12 0.5568 0.6355 0.5674 0.5066 0.4523 0.4039 0.3606 0.3220 0.2875 0.2567 0.2292 0.2046 0.1827 0.1631 0.1456 0.1300 0.1161 0.1037 13 14 15 16 0.5303 0.5051 0.4810 0.4581 0.4363 0.4155 0.3957 0.3769 17 0.2633 0.2394 0.2176 0.1978 0.1799 0.1635 0.1486 18 19 20 Present Value of $1 Annuity Periods 1 4% 0.9615 5% 0.9524 9% 0.9174 10% 0.9091 11% 0.9009 2 3 4 5 6 7 8 1.8861 2.7751 3.6299 4.4518 5.2421 6.0021 6.7327 7.4353 8.1109 8.7605 9.3851 9.9856 10.5631 1.8594 2.7232 3.5460 4.3295 5.0757 5.7864 6.4632 7.1078 7.7217 8.3064 8.8633 3% 0.9709 1.9135 2.8286 3.7171 4.5797 5.4172 6.2303 7.0197 7.7861 8.5302 9.2526 9.9540 10.6350 11.2961 11.9379 12.5611 13.1661 13.7535 14.3238 14.8775 9 Rate per period 7% 8% 0.9346 0.9259 1.8080 1.7833 2.6243 2.5771 3.3872 3.3121 4.1002 3.9927 4.7665 4.6229 5.3893 5.2064 5.9713 5.7466 6.5152 6.2469 7.0236 6.7101 7.4987 7.1390 7.9427 7.5361 8.3577 7.9038 8.7455 8.2442 9.1079 8.5595 9.4466 8.8514 9.7632 9.1216 10.0591 9.3719 10.3356 9.6036 10.5940 9.8181 6% 0.9434 1.8334 2.6730 3.4651 4.2124 4.9173 5.5824 6.2098 6.8017 7.3601 7.8869 8.3838 8.8527 9.2950 9.7122 10.1059 10.4773 10.8276 11.1581 11.4699 10 11 12 1.7591 2.5313 3.2397 3.8897 4.4859 5.0330 5.5348 5.9952 6.4177 6.8052 7.1607 7.4869 7.7862 8.0607 8.3126 8.5436 8.7556 8.9501 9.1285 12% 0.8929 1.6901 2.4018 3.0373 3.6048 4.1114 4.5638 4.9676 5.3282 5.6502 5.9377 6.1944 6.4235 6.6282 6.8109 6.9740 7.1196 1.7355 2.4869 3.1699 3.7908 4.3553 4.8684 5.3349 5.7590 6.1446 6.4951 6.8137 7.1034 7.3667 7.6061 7.8237 8.0216 8.2014 8.3649 8.5136 1.7125 2.4437 3.1024 3.6959 4.2305 4.7122 5.1461 5.5370 5.8892 6.2065 6.4924 6.7499 6.9819 7.1909 7.3792 7.5488 7.7016 7.8393 7.9633 13 9.3936 11.1184 14 15 16 17 18 19 11.6523 12.1657 12.6593 13.1339 13.5903 9.8986 10.3797 10.8378 11.2741 11.6896 12.0853 7.2497 7.3658 7.4694 20 12.4622 Question 3(b) (3 Marks) Determine whether Jack Ltd can measure the corporate bonds at amortised cost. . 1 III III LA HU ! Question 3(c) (4 Marks) Required: Calculate the amortised cost of the bonds as at 30 June 2023. to $ A B 1 !!! Enter your answer into the template below: Question 3(d) (5 Marks) Provide the accounting journal entries for the year ending 30 June 2023. AA B 1 Enter your Journal Entries into the template below. Show your workings underneath the Journal where indicated: Date Details Debit Credit On 1 July 2022, Jack Ltd acquired some corporate bonds issued by McCoy Ltd. They had a 'face value of $2 million and offered a coupon rate of 10% paid annually ($100,000 per year), paid on 30 June for next four years. The bonds would repay the principal of $2 million on 30 June 2026. At the time the market only required a rate of return on 8% on such bonds. Jack Ltd operates within a business model where corporate bonds are held in order to collect contractual cash flows and there is no intention to trade them. Assume that there were no initial direct costs incurred in obtaining the bonds. * NPV Tables are available for reference. Show all your workings. Question 3(a) 4 Marks) Required: Identify the present value or the fair value of the bond asset. BI to !!! Present Value of $1 Periods 6% 1 4% 0.9615 0.9246 0.8890 5% 0.9524 0.9070 0.9434 0.8900 10% 0.9091 0.8264 0.7513 12% 0.8929 0.7972 2 3 0.8638 0.7118 4 0.8548 0.6830 5 6 7 0.8227 0.7835 0.7462 0.7107 0.6768 0.6446 0.6139 0.5847 8 9 3% 0.9709 0.9426 0.9151 0.8885 0.8626 0.8375 0.8131 0.7894 0.7664 0.7441 0.7224 0.7014 0.6810 0.6611 0.6419 0.6232 0.6050 0.5874 0.5703 0.5537 10 Rate per period 7% 8% 0.9346 0.9259 0.8734 0.8573 0.8163 0.7938 0.7629 0.7350 0.7130 0.6806 0.6663 0.6302 0.6227 0.5835 0.5820 0.5403 0.5439 0.5002 0.5083 0.4632 0.4751 0.4289 0.4440 0.3971 0.4150 0.3677 0.3878 0.3405 0.3624 0.3152 0.3387 0.2919 0.3166 0.2703 0.2959 0.2502 0.2765 0.2317 0.2584 0.2145 0.8396 0.7921 0.7473 0.7050 0.6651 0.6274 0.5919 0.5584 0.5268 0.4970 0.4688 0.4423 0.4173 0.3936 0.3714 0.3503 0.3305 0.3118 9% 0.9174 0.8417 0.7722 0.7084 0.6499 0.5963 0.5470 0.5019 0.4604 0.4224 0.3875 0.3555 0.3262 0.2992 0.2745 0.2519 0.2311 0.2120 0.1945 0.1784 0.8219 0.7903 0.7599 0.7307 0.7026 0.6756 0.6496 0.6246 0.6006 0.5775 0.5553 0.5339 0.5134 0.4936 0.4746 0.4564 0.6209 0.5645 0.5132 0.4665 0.4241 0.3855 0.3505 0.3186 0.2897 11 11% 0.9009 0.8116 0.7312 0.6587 0.5935 0.5346 0.4817 0.4339 0.3909 0.3522 0.3173 0.2858 0.2575 0.2320 0.2090 0.1883 0.1696 0.1528 0.1377 0.1240 12 0.5568 0.6355 0.5674 0.5066 0.4523 0.4039 0.3606 0.3220 0.2875 0.2567 0.2292 0.2046 0.1827 0.1631 0.1456 0.1300 0.1161 0.1037 13 14 15 16 0.5303 0.5051 0.4810 0.4581 0.4363 0.4155 0.3957 0.3769 17 0.2633 0.2394 0.2176 0.1978 0.1799 0.1635 0.1486 18 19 20 Present Value of $1 Annuity Periods 1 4% 0.9615 5% 0.9524 9% 0.9174 10% 0.9091 11% 0.9009 2 3 4 5 6 7 8 1.8861 2.7751 3.6299 4.4518 5.2421 6.0021 6.7327 7.4353 8.1109 8.7605 9.3851 9.9856 10.5631 1.8594 2.7232 3.5460 4.3295 5.0757 5.7864 6.4632 7.1078 7.7217 8.3064 8.8633 3% 0.9709 1.9135 2.8286 3.7171 4.5797 5.4172 6.2303 7.0197 7.7861 8.5302 9.2526 9.9540 10.6350 11.2961 11.9379 12.5611 13.1661 13.7535 14.3238 14.8775 9 Rate per period 7% 8% 0.9346 0.9259 1.8080 1.7833 2.6243 2.5771 3.3872 3.3121 4.1002 3.9927 4.7665 4.6229 5.3893 5.2064 5.9713 5.7466 6.5152 6.2469 7.0236 6.7101 7.4987 7.1390 7.9427 7.5361 8.3577 7.9038 8.7455 8.2442 9.1079 8.5595 9.4466 8.8514 9.7632 9.1216 10.0591 9.3719 10.3356 9.6036 10.5940 9.8181 6% 0.9434 1.8334 2.6730 3.4651 4.2124 4.9173 5.5824 6.2098 6.8017 7.3601 7.8869 8.3838 8.8527 9.2950 9.7122 10.1059 10.4773 10.8276 11.1581 11.4699 10 11 12 1.7591 2.5313 3.2397 3.8897 4.4859 5.0330 5.5348 5.9952 6.4177 6.8052 7.1607 7.4869 7.7862 8.0607 8.3126 8.5436 8.7556 8.9501 9.1285 12% 0.8929 1.6901 2.4018 3.0373 3.6048 4.1114 4.5638 4.9676 5.3282 5.6502 5.9377 6.1944 6.4235 6.6282 6.8109 6.9740 7.1196 1.7355 2.4869 3.1699 3.7908 4.3553 4.8684 5.3349 5.7590 6.1446 6.4951 6.8137 7.1034 7.3667 7.6061 7.8237 8.0216 8.2014 8.3649 8.5136 1.7125 2.4437 3.1024 3.6959 4.2305 4.7122 5.1461 5.5370 5.8892 6.2065 6.4924 6.7499 6.9819 7.1909 7.3792 7.5488 7.7016 7.8393 7.9633 13 9.3936 11.1184 14 15 16 17 18 19 11.6523 12.1657 12.6593 13.1339 13.5903 9.8986 10.3797 10.8378 11.2741 11.6896 12.0853 7.2497 7.3658 7.4694 20 12.4622 Question 3(b) (3 Marks) Determine whether Jack Ltd can measure the corporate bonds at amortised cost. . 1 III III LA HU ! Question 3(c) (4 Marks) Required: Calculate the amortised cost of the bonds as at 30 June 2023. to $ A B 1 !!! Enter your answer into the template below: Question 3(d) (5 Marks) Provide the accounting journal entries for the year ending 30 June 2023. AA B 1 Enter your Journal Entries into the template below. Show your workings underneath the Journal where indicated: Date Details Debit Credit