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hello,
On 1 January 20X1 Penfold Co purchased a debt instrument at its fair value of $500,000. It
had a principal amount of $550,000 and was due to mature in five years. The debt
instrument carries a fixed interest of 6% paid annually in arrears and has an effective interest
rate of 8%. It is held at amortized cost.
At what amount will the debt instrument be shown in the statement of financial position
of Penfold Co as of 31 December 20X2?My question is what is the significance/meaning of the following line:
‘It had a principal amount of $550,000’.
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