QUESTION $1[$January $2019,$ Question $3]$

$($a$)$ Joplin Limited invested $1,000$ in a debt instrument $($issued at par$)$ on $1$ January $2018.$ The

term of the debt is five years and the coupon rate of interest attached to the instrument is

$6\%.$ Upon redemption, Joplin Limited will receive the initial $1,000$ investment back plus a

bonus premium of $250.$ The effective rate of interest is $10\mathrm{.}1\%.$

The fair value of the instrument on $31$ December $2018$ was $1,100.$

Requirement

Show how the investment should be measured and recognised in Joplin Limited's $2018$

financial statements assuming the investment:

$($i$)$ passes the business model and cash flow characteristics model tests and there is

no designation of the investment as fair value through profit or loss;

$6$ Marks

$($ii$)$ does not pass the business model or cash flow characteristics model tests.

$6_{?}$ Marks

Answer these questions.

For part $($a$)($i$)$:

What is the amount that the investment will be measured at in the financial statements of

Joplin Limited on $31$ December $2018?$

A $$nil

B $1041$

C $101$

D $1000$

What is the amount of finance income that Joplin should recognise in its statement of profit or

loss and other comprehensive for the year ended $31$ December $2018?$

A $161$

B $101$

C $41$

$D60$

$1$

What is the amount that the investment will be measured at in the financial statements of Joplin

Limited on $31$ December $2021?$

A $1310$

B $1000$

C $115$

D $1190$

For part $($a$)($ii$)$:

What is the amount of gain or loss on the remeasurement of the investment in the debt instrument

that Joplin Limited should recognise in its financial statements for the year ended $31$ December

$2018?$

A $100$ loss

B $160$ gain

C $160$ loss

D $100$ gain