On October 1, Jones Ltd. purchased a 7% bond with a face value of $1,000 for trading purposes, accounting for the investment at fair value through net income. The bond was priced at 1.023 to yield Jones 5% and pays interest annually each October 1. Jones has a December 31 year end, and at this date, the bonds fair value was $1,050. Assume Jones applies IFRS.

Instructions

a) Prepare Joness entry for the purchase of the investment.

b) Prepare Joness entry for the December 31 interest accrual.

c) (i) Prepare Joness entry for the year-end fair value adjustment.

(ii) Assume Jones applies ASPE, uses the effective-interest method, and follows a policy of reporting interest income separately.