On January 1, 2015, Helsinky Co. paid $236,163 for 8% bonds of Britanica Corp. with a maturity value of $250,000, to mature January 1, 2023. The bonds provide a 9% yield and pay interest each December 31. Helsinky purchased these bonds as part of its trading portfolio and accounts for the bonds as held-for-trading (HFT) investments. On December 31, 2015, the bonds had a fair value of $240,000. Helsinky follows IFRS and has a December 31 year-end.
During 2016, the industry sector that Britanica operates in experienced some difficult times due to the drop in prices for oil and gas. As a result, by December 31, 2016, their debt was downgraded to the price-point of 87.3. By December 31, 2017, the pricepoint for the bond had a market price of 92.3. In 2018, conditions improved measurably resulting in the bonds to have a fair value on December 31, 2018 of 99.3.
Required:
a. Prepare all of the relevant entries for 2015, 2016, 2017 and 2018, including any adjusting entries as required. Round entry amounts to the nearest whole dollar.
b. If Helsinky had accounted for the investment at amortized cost, identify and describe the impairment model that the company would have used if they had followed IFRS or ASPE.
