Chapter 9
Investments
441
AP-5A (
1
2
)
On July 1, 2016, Kabir Company, a public company, decided to buy $240,000, 6% 10-year
bonds at par, issued by a private company in Canada. The semi-annual payments are made
on January 1 and July 1. The company intends to trade the bonds within the next six to
nine months. Kabir Company records the bonds using the fair value through profit and loss
method, in compliance with IFRS. Kabir Company has a year-end of September 30.
Required
a) Record acquisition of the bonds.
Date
Account Title and Explanation
Debit
Credit
b) Assume that on September 30, 2016, the market value of the bonds decreased
significantly to $219,000 due to a change of market interest rate. Prepare journal entries to
make the adjustment on this date. You do not need to record the interest accrued for this
question.
Date
Account Title and Explanation
Debit
Credit
