aja Plc has two investments. One, an investment in listed shares, is available for sale as a financial asset. The current market value is £405,000 but the shares were bought for £675,000. The other is an investment in a three year bond with an amortised cost of £450,000 with a stated and effective interest rate of 7% (current market rates are 10%). After two years Jaja Plc is not expecting to receive the last year’s interest and expects to receive only 2/3 of the principal. Required : What is impairment? What impairment should be recorded in the accounts of Jaja Plc for the listed shares and the three year bond?
aja Plc has two investments. One, an investment in listed shares, is available for sale as a financial asset. The current market value is £405,000 but the shares were bought for £675,000. The other is an investment in a three year bond with an amortised cost of £450,000 with a stated and effective interest rate of 7% (current market rates are 10%). After two years Jaja Plc is not expecting to receive the last year’s interest and expects to receive only 2/3 of the principal. Required : What is impairment? What impairment should be recorded in the accounts of Jaja Plc for the listed shares and the three year bond?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Jaja Plc has two investments. One, an investment in listed shares, is available for sale as a financial asset. The current market value is £405,000 but the shares were bought for £675,000. The other is an investment in a three year bond with an amortised cost of £450,000 with a stated and effective interest rate of 7% (current market rates are 10%). After two years Jaja Plc is not expecting to receive the last year’s interest and expects to receive only 2/3 of the principal.
Required : What is impairment? What impairment should be recorded in the accounts of Jaja Plc for the listed shares and the three year bond?
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