Accounting · Financial Instruments (IFRS 9)
Company Plutus acquired two financial instruments on 1 January 20X5: 1. Debt Instrument: Purchased a 5-year, $500,000 nominal value bond for $470,000. It has a 6% annual coupon paid in arrears. The effective interest rate is 8%. Plutus's business model is to hold bonds to collect contractual cash flows but may sell if a higher-return investment becomes available. 2. Equity Instrument: Purchased 100,000 shares of Company Beta, a listed entity, for $2.50 per share. Transaction costs of $5,000 were incurred. Plutus irrevocably elected to designate this investment at fair value through other comprehensive income (FVOCI). At 31 December 20X5, the market value of Beta's shares was $2.80 per share. What is the combined impact on profit or loss and other comprehensive income (OCI) for the year ended 31 December 20X5?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Profit or Loss: $32,600 credit; Other Comprehensive Income: $30,000 credit
- 2Profit or Loss: $32,600 credit; Other Comprehensive Income: $25,000 credit
- 3Profit or Loss: $37,600 credit; Other Comprehensive Income: $30,000 credit
- 4Profit or Loss: $37,600 credit; Other Comprehensive Income: $25,000 credit✓
Correct answer
Profit or Loss: $37,600 credit; Other Comprehensive Income: $25,000 credit
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