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FINANCIAL ACCOUNTING 311
DEPARTMENT OF
IFRS 9: Financial Instruments
ACCOUNTING
Tutor question two
S Aboo Baker Ebrahim
UP
QUESTION 2
You have recently been appointed as the accountant of Pro-Art Limited and you should
assist the personnel, who is uncertain regarding the accounting treatment of financial
instruments, in finalising the financial statements for the year ended 28 February 2018.
On 1 March 2017, Pro-Art Limited acquired an interest in 12% government bonds with
a par value of R1 500 000 at R1 516 561. Transaction costs amounting to R12 000
has been incurred. The government bonds mature at a premium of 5% on 28 February
2020 and interest is payable annually in arrears on 28 February. The market rate for
instruments with similar terms and conditions amounts to 13% per annum.
Pro-Art Limited’s business model’s objective is to hold financial assets to collect
contractual cash flows. Pro-Art Limited classified the investment as at amortised cost
Ignore taxation.
REQUIRED:
Journalise the above information in the General Journal of Pro-Art Limited for the years
ended 28 February 2018, 2019 and 2020 in accordance with International Financial
Reporting Standards (IFRS).
Note: - Journal narrations are not required.
- Journals should be dated.
- Round all calculated amounts off to the nearest R1.
- Round calculated interest rates to 4 decimals.
FINANCIAL INSTRUMENTS 2020_TUTOR QUESTION 2
FINANCIAL ACCOUNTING 311
DEPARTMENT OF
IFRS 9: Financial Instruments
ACCOUNTING
Tutor question two
S Aboo Baker Ebrahim
UP
QUESTION 2
You have recently been appointed as the accountant of Pro-Art Limited and you should
assist the personnel, who is uncertain regarding the accounting treatment of financial
instruments, in finalising the financial statements for the year ended 28 February 2018.
On 1 March 2017, Pro-Art Limited acquired an interest in 12% government bonds with
a par value of R1 500 000 at R1 516 561. Transaction costs amounting to R12 000
has been incurred. The government bonds mature at a premium of 5% on 28 February
2020 and interest is payable annually in arrears on 28 February. The market rate for
instruments with similar terms and conditions amounts to 13% per annum.
Pro-Art Limited’s business model’s objective is to hold financial assets to collect
contractual cash flows. Pro-Art Limited classified the investment as at amortised cost
Ignore taxation.
REQUIRED:
Journalise the above information in the General Journal of Pro-Art Limited for the years
ended 28 February 2018, 2019 and 2020 in accordance with International Financial
Reporting Standards (IFRS).
Note: - Journal narrations are not required.
- Journals should be dated.
- Round all calculated amounts off to the nearest R1.
- Round calculated interest rates to 4 decimals.
FINANCIAL INSTRUMENTS 2020_TUTOR QUESTION 2
