On January 1, 2021, Novak Ltd. paid $316.289.83 for 12% bonds of Variation Ltd. with a maturity value of $294,000. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2021, mature on January 1, 2026, and pay interest each December 31. Novak acquired the bond investment as part of its portfolio of trading securities and it accounts for the bonds at FV-NI, following IFRS. At December 31, 2021, Novak's year end, the bonds had a fair value of $314,300.00 During 2022, the economic outlook related to Variation's primary business took a major downturn, so that Variation's debt was downgraded. By the end of 2022, the bonds were priced at 85.5, and at December 31, 2023, they were selling in the market at 87. Conditions reversed in 2024 and the outlook for Variation significantly improved, leaving its bonds with a fair value of 99.5 at December 31, 2024.

On January 1, 2021, Novak Ltd. paid $316.289.83 for 12% bonds of Variation Ltd. with a maturity value of $294,000. The bonds provide the bondholders with a 10% yield. They are dated January 1, 2021, mature on January 1, 2026, and pay interest each December 31. Novak acquired the bond investment as part of its portfolio of trading securities and it accounts for the bonds at FV-NI, following IFRS. At December 31, 2021, Novak's year end, the bonds had a fair value of $314,300.00 During 2022, the economic outlook related to Variation's primary business took a major downturn, so that Variation's debt was downgraded. By the end of 2022, the bonds were priced at 85.5, and at December 31, 2023, they were selling in the market at 87. Conditions reversed in 2024 and the outlook for Variation significantly improved, leaving its bonds with a fair value of 99.5 at December 31, 2024.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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