. . . QUESTION 4 FINANCIAL INSTRUMENTS (35 Marks) On 1 January 20X7 Bain Limited purchased government bonds for R800 000. The face value is R840 000 and the coupon interest is 8% p.a., payable annually in arrears. The government bonds are redeemable at face value in 3 years. The effective interest rate is 9,9119% pa. The company's intention was to hold the governmentbonds to collect contractual cash flows and the return of capital and interest On 31 July 20X8, the company changed its business model (the new business model became effecte from this date) relating to the government bonds. The fair value on this date was R925 000 and changed to R966 000 on 31 December 20X8. Credit risk has not increased significandy since initial recognition over the 3 years and the asset was not been credit impaired at any point The 12 month-expected credit losses were estimated as follows: Date 12 month expected credit loss . R 28 000 29 000 1 January 20X7 31 December 20X7 31 July 20X8 31 December 20X8 42 000 43 000 (35) YOU ARE REQUIRED TO: Prepare all related journal entries in Bain Limited's general joumal for the years ended 31 December 20X7 20X8 and 20X9. The govemment bonds were reclassified from amortised cost to fair value through profit or loss. -End of Question Paper . . . QUESTION 4 FINANCIAL INSTRUMENTS (35 Marks) On 1 January 20X7 Bain Limited purchased government bonds for R800 000. The face value is R840 000 and the coupon interest is 8% p.a., payable annually in arrears. The government bonds are redeemable at face value in 3 years. The effective interest rate is 9,9119% pa. The company's intention was to hold the governmentbonds to collect contractual cash flows and the return of capital and interest On 31 July 20X8, the company changed its business model (the new business model became effecte from this date) relating to the government bonds. The fair value on this date was R925 000 and changed to R966 000 on 31 December 20X8. Credit risk has not increased significandy since initial recognition over the 3 years and the asset was not been credit impaired at any point The 12 month-expected credit losses were estimated as follows: Date 12 month expected credit loss . R 28 000 29 000 1 January 20X7 31 December 20X7 31 July 20X8 31 December 20X8 42 000 43 000 (35) YOU ARE REQUIRED TO: Prepare all related journal entries in Bain Limited's general joumal for the years ended 31 December 20X7 20X8 and 20X9. The govemment bonds were reclassified from amortised cost to fair value through profit or loss. -End of Question Paper