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Prepare 4M entry for the purchase of the investment

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Reference no: EM132623961

Question - On October 1, 4M Ltd. purchased a 7% bond with a face value of $1,000 for trading purposes, accounting for the investment at fair value through net income. The bond was priced at 1.023 to yield 4M 5%, and pays interest annually each October 1. 4M has a December 31 year end, and at this date, the bond's fair value was $1,050. Assume 4M applies IFRS and follows a policy of not reporting interest income separately from investment income.

Required -

1. Prepare 4M's entry for the purchase of the investment.

2. Prepare 4M's entry for the December 31 interest accrual.

3. Prepare 4M's entry for the year-end fair value adjustment.

4. Assume 4M applied ASPE, uses the effective-interest method, and follows a policy of reporting interest income separately.

Reference no: EM132623961

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