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Chapter 13: 6IFRS (page 658)
Consider the bond investment by Lady Gaga in IFRS17-5. Discuss the accounting for this investment if Lady Gaga’s
Business model is to hold the investment to collect interest while outstanding and to receive the principal at maturity.
Given investment is classified as held-for-collection.
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In determining the amount of a provision, a company using IFRS should generally measure:
(a) Using the midpoint of the range between the lowest possible loss and the highest possible loss.
(b) Using the minimum amount of the loss in the range.
(c) Using the best estimate of the amount of the loss expected to occur.
(d) Using the maximum amount of the loss in the range.
On January 1, 2017, Roosevelt Company purchased 12% bonds, having a maturity value of \(500,000, for \)537,907.40.
The bonds provide the bondholders with a 10% yield. They are dated January 1, 2017, and mature January 1, 2022, with interest
received January 1 of each year. Roosevelt’s business model is to hold these bonds to collect contractual cash flows.
Instructions
(a) Prepare the journal entry at the date of the bond purchase.
(b) Prepare a bond amortization schedule.
(c) Prepare the journal entry to record the interest revenue and the amortization for 2017.
(d) Prepare the journal entry to record the interest revenue and the amortization for 2018
How does unearned revenue arise? Why can it be classified properly as a current liability? Give several examples of business activities that result in unearned revenues.
What evidence is necessary to demonstrate the ability to consummate the refinancing of short-term debt?
Fairbanks Corporation purchased 400 ordinary shares of Sherman Inc. as a trading investment for \(13,200. During the year, Sherman paid a cash dividend of \)3.25 per share. At year-end, Sherman shares were selling for $34.50 per share. Prepare Fairbanks’ journal entries to record (a) the purchase of the investment, (b) the dividends received, and (c) the fair value adjustment
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