On 1st January 2019, RTID Ltd purchased 100 bonds at £100 from SUFC ltd at par value. The bonds are redeemable at par and bear interest at 5% per annum in arrears. The market rate on equivalent bonds is 5% on 1st January 2019, and 4% on 31st December 2019. RTID ltd holds a number of such bonds but they are not for the purpose of trading and merely used as a vessel for unused capital investment projects in the company. Upon purchasing the bonds, RTID incurred a direct cost of ­£1000.

a) Prepare appropriate accounting entries (either journal form through the use of T-account which will show the value of the bod in the financial statement of RTID Ltd as at the end of 2019. Include a brief extract to the financial statement which supports your cal calculation.

b) Assuming that the bonds have been designated as being valued at fair value through profit and loss, prepare the appropriate accounting entries for RTID Ltd as at the end of 2019, includes a brief extract to the financial statement which supports your calculations.

c) Discuss why transaction cost is capitalized as a part of the financial instrument when the asset is measured at an amortized cost, but are ignored when it is measured at fair value through profit and loss.