Question 4 Trendy Bhd’s financial year ends on 30 June. On 1 July 2016, Trendy B

Question

Question 4
Trendy Bhd’s financial year ends on 30 June. On 1 July 2016, Trendy Bhd acquired RM100 million bonds at a cost of RM90,000,000, inclusive of transaction costs. The bonds pay a fixed interest of RM5 million per annum and mature on 1 July 2018. On the date of purchase, the management of Trendy Bhd intended to hold the bonds and collect the contractual cash flows arising from them upon maturity. The effective interest rate of the bonds on 1 July 2016 was 7%.
Required:
With reference to MFRS 9 Financial Instruments, explain how Trendy Bhd should recognise and measure the bonds. Show the value of the bonds as at 30 June 2017. (

Explanation / Answer

The interest income from these bonds held for maturity will be reported as income and in income statements

the bonds fair value at end of 30th june 2017 can be found using pv formuale in excel

=pv(Rate,nper,pmt,fv,type)

=pv(7%,1,5*10^6,100*10^6,0)

=98,130,841.12

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