Yang Limited is a manufacturing company. It held the debt securities of ABC Limited in year
2020 . The year-end unamortized cost and fair values for ABC debt securities are as follows: The
business model of the debt investment is to collect the contractual cash flows and to sell before
maturity from time to time. The contractual cash flows of the investment are solely payments of
principal and interest on the principal outstanding. All the debt securities were sold for $450,000
on January 1,2023. Required: a) Provide at least two risks associated with debt investment from
the perspective of an investor. (2 marks) b) Advise the measurement classification for investment
in debt securities of ABC Limited? (1 mark)
c) Describe how we record the difference between amortized cost and fair value at the year-end
of 2021 and 2022.(You are required to write complete sentences for the description. Journal
entries are not required) (5 marks) d) After the sale of the debt investment of ABC Limited, the
director of Yang Limited decided to recycle the fair value gain of the debt investment out of OCl
to profit or loss. Explain briefly why the director intended to do the recycling..
Yang Limited is a manufacturing company. It held the debt securities .pdf
1. Yang Limited is a manufacturing company. It held the debt securities of ABC Limited in year
2020 . The year-end unamortized cost and fair values for ABC debt securities are as follows: The
business model of the debt investment is to collect the contractual cash flows and to sell before
maturity from time to time. The contractual cash flows of the investment are solely payments of
principal and interest on the principal outstanding. All the debt securities were sold for $450,000
on January 1,2023. Required: a) Provide at least two risks associated with debt investment from
the perspective of an investor. (2 marks) b) Advise the measurement classification for investment
in debt securities of ABC Limited? (1 mark)
c) Describe how we record the difference between amortized cost and fair value at the year-end
of 2021 and 2022.(You are required to write complete sentences for the description. Journal
entries are not required) (5 marks) d) After the sale of the debt investment of ABC Limited, the
director of Yang Limited decided to recycle the fair value gain of the debt investment out of OCl
to profit or loss. Explain briefly why the director intended to do the recycling.
