Question 2 (Total 15 marks) a) Orion Ltd is an investment company that primarily trades in shares on the Australian Securities Exchange and occasionally trades in debt instruments available on the market. For accounting purposes, its equity instruments (shares) are measured at fair value through the profit and loss account using trade date accounting. The settlement date is T+3 (settle in three business days). Any debt instruments are initially measured at fair value and subsequently measured at amortised cost. During the year ended 31 December 2020, the company made the following share trades in Woolworths Ltd: Trade date Action 4/11/20 Buy Quantity 10,000 2,000 5,000 Price/share $80 $85 $84 Brokerage fees $400 $400 $400 Sell 30/11/20 31/12/20 Buy The closing market price of Woolworths Ltd shares on 31 December 2021 was $86. Required: Prepare the journal entries necessary to record the above trades in Woolworths Ltd's shares for the years ended 31 December 2020 and 31 December 2021. Show all workings and narrations. Entries should be rounded to the nearest dollar. (9 marks) b) On 1 January 2020, Orion Ltd purchased a debt instrument (issued by Coles Ltd) with a remaining 3-year term for cash consideration of $1,085,868 (including transaction costs). The instrument has a principal amount of $1,250,000 (the amount receivable on redemption on 31 December 2022) and an interest coupon of 4.72% distributed at the end of each calendar year. The effective interest rate is 10%. Req Prepare the journal entries necessary for initial and subsequent recognition of the Coles Ltd debt instrument for the years ended 31 December 2020, 31 December 2021 and 31 December 2022. Show all workings. Entries should be rounded to the nearest dollar. (6 marks) Question 2 (Total 15 marks) a) Orion Ltd is an investment company that primarily trades in shares on the Australian Securities Exchange and occasionally trades in debt instruments available on the market. For accounting purposes, its equity instruments (shares) are measured at fair value through the profit and loss account using trade date accounting. The settlement date is T+3 (settle in three business days). Any debt instruments are initially measured at fair value and subsequently measured at amortised cost. During the year ended 31 December 2020, the company made the following share trades in Woolworths Ltd: Trade date Action 4/11/20 Buy Quantity 10,000 2,000 5,000 Price/share $80 $85 $84 Brokerage fees $400 $400 $400 Sell 30/11/20 31/12/20 Buy The closing market price of Woolworths Ltd shares on 31 December 2021 was $86. Required: Prepare the journal entries necessary to record the above trades in Woolworths Ltd's shares for the years ended 31 December 2020 and 31 December 2021. Show all workings and narrations. Entries should be rounded to the nearest dollar. (9 marks) b) On 1 January 2020, Orion Ltd purchased a debt instrument (issued by Coles Ltd) with a remaining 3-year term for cash consideration of $1,085,868 (including transaction costs). The instrument has a principal amount of $1,250,000 (the amount receivable on redemption on 31 December 2022) and an interest coupon of 4.72% distributed at the end of each calendar year. The effective interest rate is 10%. Req Prepare the journal entries necessary for initial and subsequent recognition of the Coles Ltd debt instrument for the years ended 31 December 2020, 31 December 2021 and 31 December 2022. Show all workings. Entries should be rounded to the nearest dollar. (6 marks)
