Muhammad Ali Malik

TEST YOUR UNDERSTANDING# 5 (18i-0221)

CASE#1 Tokyo plans to hold bond until redemption date. (at

AmmortisationAmortization Cost)

Cr(Cr
Date Particulars Particulars Dr ($) ($)
01-Jan-01 Bond Investment   97000  
    Bank A/C   97000
         
       
31/12/01 Cash A/c   5000  
  Investment in Bonds   2760  
    Finance Income   7760
     
       
31/12/200
2 Cash A/c   5000  
  Investment in Bonds   2981  
    Finance Income   7981
       
31/12/200
3 Cash A/c   5000  
  Investment in Bonds   3219  
    Finance Income   8219
         
       
31/12/200
3 Bank A/c   97000  
  Share Premium   8960  
    Investment in Bonds   105960
Case#2 Tokyo may sell if possibility of investment with higher return arises. (through OCI)

Cr(Cr
Date Particulars Particulars Dr ($) ($)
01-01-01 Bond Investment   97000  
    Bank A/C   97000
         
31/12/200
1 Cash A/c   5000  
  Investment In bonds   2760  
    Finance Income   7760
31/12/200
1 Other Comp. Income   10240  
    Revaluation Gain   10240
         
01-01-02 Bond Investment   110000  
    Balance Sheet   110000
         
31/12/200
2 Cash A/c   5000  
Investment Inin
  Bonds   2981  
    Finance Income   7981
31/12/200
2 Loss on Investment   8981  
    Other Comprehensive Income   8981
         
Bond
InvestemetInvestmen
01-01-03 t   104000  
    Balance Sheet   104000
         
31/12/200 IntrestInterest
3 recievablereceivable   8219  
    Finance Income   8219
         
31/12/200
3 Loss on Investment   1259  
    Other Comprehensive Income   1259
         
31-12-03 Bank A/c   97000  
  Share Premium   8960  
    Investment Inin Bonds   105960
Case# 3 Tokyo planned to trade bond in the shot-term, selling it for fair value on januaryJanuary 1, 200
(Through Profi
Cr(Cr
Date Particulars Particulars Dr ($) ($)
01-01-01 Bond Investment   95000  
  Transaction Cost   2000  
    Bank A/C   97000
         
31/12/200
1 Cash A/c   5000  
    Finance Income   5000
         
31/12/200
1 Profit & Loss   15000  
    Gain on investment   15000
         
01-01-02 Cash A/C   110000  
    Bond Investment   110000