On February 1, 2020, EastCo purchased $80,000,000 in 7% bonds that will mature in 4 years. Management's business model is to sell the investment if market prices rise to a
specific price, but will also hold and collect investment income at the present time. For bonds of similar risk and maturity, the market yield was 9%. Interest is received
semiannually on July 31 and January 31. Due to changing market conditions, the fair value of the bonds at January 31, 2021, was $64,000,000. EastCo follows IFRS.
Answer the following questions. Please make sure your final answer(s) are accurate to the nearest whole number. For simplicity, ignore any tax effects and expected credit losses
(ECL) estimated at the time of the investment's acquisition. Enter an appropriate description when entering the transactions in the journal. Dates must be entered in the format
dd/mmm (ie. January 15 would be 15/Jan).
a) Prepare the journal entry to record EastCo's investment on February 1, 2020.
Date
General Journal
Account/Explanation
Page G1
PR Debit Credit
b) Prepare the journal entry by EastCo to record interest on July 31, 2020.
Date
General Journal
Account/Explanation
Page G1
PR Debit Credit
c) Prepare the journal entry by EastCo to record interest on January 31, 2021.
Date
General Journal
Account/Explanation
Page G1
PR Debit Credit
d) Prepare the adjustment necessary to report EastCo's investment on the January 31, 2021 balance sheet.
Date
General Journal
Account/Explanation
Page G1
PR Debit Credit
e) What amounts will EastCo report for its investment on the January 31, 2021 balance sheet?