Accounting Standards

On 1 January 2013 Hydra plc lends £15,000 to John at 6% p.a. (payable annually in arrears) for 3 years and then at 8% p.a. for 3 years with the full £15,000 repayable at the end of the five year term. John will not be making early repayment.

Hydra Plc acquires, also on 1 January 2013, some shares as an investment for £33,526 for cash. At the end of December, 2013, the shares at valued at £37,111. In the next accounting period (the year to 31/12/14) the shares are sold for £38,200.

Required
(a) Elaborate, calculate and show the accounting implications of the above.
(b) Critically evaluate current accounting standards in this area.