Question 2 GHI Ltd is a local media enterprise which has its shares listed on Hong Kong Stock Exchange. It has the following financial instruments

Owing to expand further its business enterprise, it issued 2 years bonds on April 1, 2019. The bond had principal amount of $10 million and carry a fixed interest of 6% per annum. Interest is paid semi-annually on 30 September and 31 March. The market interest rate for similar debts was 8% per annum.

GHI Ltd has invested in the following companies

1. There was a bonds issued by PHA Trading Ltd. On 1 October 2018, GHI acquired a 10% $400,000 bond with 3 years term at its fair value. The bond will be repurchased at its nominal amount. Interest is payable at end of each year, in arrears. GHI Ltds target is to hold such bond to collect cash.

2. LCD Ltd is a company listed on Hong Kong Stock Exchange and has total 800,000 issued ordinary shares. On 1 August 2019, GHI Ltd invested in 200,000 ordinary shares of LCD Ltd at its listed market price of $80 each, plus transaction costs $100,000. GHI Ltd intended to hold the shares for long term purpose. On 30 September 2019, the share price of LCD Ltd roses to $84 each.

Required a. Assume GHI Ltd measured its issued bonds at amortized cost. Prepare journal entries to account for its bond transactions during the year ended 30 September 2019 (Narratives are not required, all workings must be shown) (11 marks)

b. Recommend and briefly explain the appropriate measurement bases of investment made by GHI Ltd in both PHA Trading Ltd (5 marks) and LCD Ltd (5 marks)

c. `All financial liabilities must be measured at amortized cost. Discuss whether you agree with this statement. (4 marks)