Question

Assume the same information as in IFRS 17-12 except that Roosevelt has an active trading strategy for these bonds.

The fair value of the bonds at December 31 of each end-year is as follows.

2017 \(534,200 2020 \)517,000

2018 \(515,000 2021 \)500,000

2019 $513,000

Instructions

(a) Pepare the journal entry at the date of the bond purchase.

(b) Prepare the journal entries to record the interest revenue and recognition of fair value for 2017.

(c) prepare the journal entry to record the recognition of fair value for 2018.

Short answer

Debt investment debited and cash credited by $537,907.40. Cash credited by $53,790.74 and interest revenue credited by $53,790.40 . The unrealised loss is $22,907.40 .

Step-by-step solution

Entry for the purchase of the bond

Date	Particulars	Debit	Credit
	Debt Investment	$537,907.40
	Cash		$537,907.40
	(Being entry for the purchase of debt investment)

Entry for interest revenue

Date	Particulars	Debit	Credit
December31, 2017	Cash	$53.790.74
	Interest Revenue		$53,790.74
	(Being entry for the interest revenue)		$53,169.81
December 31, 2017	Unrealised Holding Gain or Loss-Loss	$3,707.40

	Fair Value Adjustment		$3,707.40
	(Being entry for fair value adjustment)

Entry for fair value adjustment

Date	Particulars	Debit	Credit
December 31, 2018	Unrealised Holding Gain or Loss-Loss	$22,907.40
	Fair Value Adjustment		$22,907.40
	(Being entry for the fair value adjustment)