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Financial asset example 3 measured at amortised cost

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Financial asset example 3 measured at amortised cost

Viewing 4 posts - 1 through 4 (of 4 total)
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  • December 6, 2018 at 8:54 am #487867
    kennigara
    Participant
    • Topics: 193
    • Replies: 250
    • ☆☆☆

    Hi Dear Tutor,I have a question.
    Norman bought 10000 debentures at a 2% discount on the par value of 100$.

    10000*100*0.98=980000
    debit investment-980000
    credit bank-980000

    I gave discounts journal entries below.Is it correct?
    debit discount cost-20000
    credit cash or bank-20000

    Thanks in advance

    December 7, 2018 at 9:04 pm #488334
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7180
    • ☆☆☆☆☆

    Hi,

    No, the discount is not recorded separately. When you have recognised the investment at $98 per debenture then the discount has already been included.

    Thanks

    December 8, 2018 at 8:32 am #488410
    kennigara
    Participant
    • Topics: 193
    • Replies: 250
    • ☆☆☆

    But if we record the investment without discount amount by giving journal entries and then giving separately transaction cost journal entries and then making adjustment such as below. If we recognise investment by deducting transaction cost, how is it possible not to give TC’s journal entry?where does TC have to be recognized in P/L? I watched your lecture it is really excellent but this question arose my mind and decided to identify it in detail.

    Debit investment-1000000
    Credit bank-1000000

    Debit Transaction cost-20000
    Credit Investment-20000

    adjustment

    Debit investment-980000
    credit bank-980000

    December 17, 2018 at 5:57 pm #492125
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7180
    • ☆☆☆☆☆

    Yes, you can split out the entry into the two parts of the transaction, but it is much easier to record it as one journal entry. Either way you end up with the same answer.

    Glad you enjoyed the lecture, thanks for the very kind comments.

    Thanks

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