Financial Assets already credit-impaired when they are purchased

Dear tutor,

I hope that you are well.

For the following question, how could we get this “$750,000” in the solution below?

Question:
On 1 July 20X6, Moorside acquired a bond in a company that was facing financial difficulties for $500,000. The bond was issued on 1 July 20X4 at par of $1 million. The terms of the bond are that it pays interest at 6% annually in arrears and is redeemable at par after 6 years on 30 June 20Y0.

When Moorside acquired the bond, it expected to receive $800,000 at redemption but no amounts of interest over the remaining 4 year term. Moorside has calculated a credit adjusted effective interest rate to be 12.5% (based on the initial $500,000 credit loss ($1m par less $500,000 cost) and the $800,000 expected redemption amount).

At 1 July 20X9, Moorside’s expectations changed and it now expects to receive $850,000 on redemption

Solution:
Moorside should initially recognise the bond on 1 July 20X6 as a financial asset at its cost of $500,000.

In the year to 30 June 20X7, Moorside should recognise interest on the recognised asset at the credit-adjusted interest rate of 12.5%. This gives rise to interest of $62,500 (12.5% x 500,000). This is added to the asset balance and recognised as interest income in profit or loss. The carrying amount of the asset at 30 June 20X7 is therefore $562,500.

Over the next two years the bond is amortised as follows:

B/f Interest at 12.5% C/f
y/e 30.6.X8 562,500 70,313 632,813
y/e 30.6.X9 632,813 79,102 711,915
At 1 July 20X9, Moorside expects to receive $850,000 rather than $800,000 on 30 June 20Y0. The new expected receipt is discounted at the effective interest rate to give a present value of $755,556 (850,000/1.125).

The current carrying amount of $711,915 is increased to this amount. The increase of $43,641 is recognised as a loss allowance in the statement of financial position and an impairment gain in profit or loss.

Had the expected proceeds fallen to $750,000, the present value of the cash flow at 1 July 20X9 would be $666,667. Therefore the carrying amount of $711,915 would be reduced by $45,248 and this would be recognised as a negative loss allowance in the statement of financial position and an impairment loss in profit or loss.

Many thanks
Vivi