Question 6: Amortized Cost and FV-NI Investments in Bonds (21 marks)

The following information relates to the debt investments of Sarasota Inc. during a recent

year:

1.

On February 1, the company purchased Gibbons Corp. 10% bonds with a face value

of $324,000 at 100 plus accrued interest. Interest is payable on April 1 and October

1.

2. On April 1, semi-annual interest was received on the Gibbons bonds.

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3.

On June 15, Sampson Inc. 9% bonds were purchased. The $216,000 par-value

bonds were purchased at 100 plus accrued interest. Interest dates are June 1 and

December 1.

4.

On August 31, Gibbons Corp. bonds with a par value of $65,000 purchased on

February 1 were sold at 99 plus accrued interest.

5.

On October 1, semi-annual interest was received on the remaining Gibbons Corp.

bonds.

6. On December 1, semi-annual interest was received on the Sampson Inc. bonds.

7.

On December 31, the fair values of the bonds purchased on February 1 and June 15

were 98.5 and 101, respectively.

Assume the investments are accounted for under the recognition and measurement

requirements of IFRS 9 Financial Instruments. Assume the investments are NOT

adjusted for Present Value.

Required:

Assume instead that Sarasota manages these investments based on their yield to

maturity (Amortized Cost) Prepare all journal entries that you consider necessary,

including December 31 adjusting entries.