Question $1$

Simba $($Pty$)$ Ltd purchased debentures in Town $($Pty$)$ Ltd on $1$ January $2021$ at a fair value of R$169$

The face of the debentures is R$115000,$ and interest is paid annually in arrears at a coupon rate of

$20\%$ per annum. The debentures will be redeemed at a premium of R$34500$ on $31$ December $2023.$

The subsequent fair values of the debentures were as follows:

$31$ December $2021$ and $1$ January $2022$

R$167152$

$31$ December $2022$ and $1$ January $2023$

The debentures have never been credit$-$impaired and there have been no significant increases in the

credit risk of the debentures since their initial recognition. Expected credit losses were estimated as:

The debentures were classified at amortised cost on initial recognition but need to be reclassified to

fair value through other comprehensive income $($FVOCI$-$debt$).$ The reason for the reclassification is

that on $1$ September $2021,$ Revolution purchased another business, which was immediately, tasked

with managing the debentures as part of one of its portfolios of assets. The portfolio is managed to

simply collect the contractual cash flows.

Task: Show the journals for the year ended $31$ December $2021$ and $31$ December $2022.(40$ Marks$)$