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Komissarov Company has a debt investment in the bonds issued by Keune Inc The bonds were purchased at par for $400000 and at the end of 2014 have a remaining life of 3 years with annual interest

Komissarov Company has a debt investment in the bonds issued by Keune Inc. The bonds were purchased at par for $400,000 and, at the end of 2014, have a remaining life of 3 years with annual interest payments at 10%, paid at the end of each year. This debt investment is classified as held-for-collection. Keune is facing a tough economic environment and informs all of its investors that it will be unable to

 

 

make all payments according to the contractual terms. The controller of Komissarov has prepared the following revised expected cash flow forecast for this bond investment.

 

 

Dec. 31

 

Expected Cash Flows

2015

 

$ 35,000

2016

 

35,000

2017

 

385,000

Total cash flows

 

$455,000

 

Instructions

(a) Determine the impairment loss for Komissarov at December 31, 2014.

(b) epa e the entry to eco d the impairment loss for Komissa ov at December 31, 2014.

(c) On January 15, 2015, Keune eceives major capital infusion om private equity investo It

informs Komissa ov that the bonds now will be paid acco ding to the contractual terms. Briefly

describe how Komissa ov would account for the bond investment in light of this new information.

 

 

Q 7 9

Your client, Cascade Company, is planning to invest some of its excess cash in 5-year revenue bonds issued by the county and in the shares of one of its suppliers, Teton Co. Teton’s shares trade on the over-the-counter market. Cascade plans to classify these investments as trading. They would like you to conduct some research on the accounting for these investments.

 

Instructions

Access the IFRS authoritative literature at the IASB website ( http://eifrs.iasb.o /). (Click on the IFRS tab and then register for free eIFRS access if necessary.) When you have accessed the documents, you can use the search tool in your Internet browser to respond to the following questions. (Provide paragraph citations.)

 

(a) Since the Teton shares do not trade on one of the large securities exchanges, Cascade argues that the fair value of this investment is not readily available. According to the authoritative literature, when is the fair value of a security “readily determinable”?

(b) How is an impairment of a debt investment accounted for?

(c avoi volatilit thei financia statement du fai valu adjustments Cascad debated

whethe th bon investmen coul classifie held-fo -collection Cascad ett su will

hold the bonds for 5 years. What criteria must be met for Cascade to classify it as held-for-collection?

Jun 18 2020 View more View Less

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