Question - Entity A acquires a 6% $1,000 bond, a financial asset, for $970, at the beginning of Year 1. Interest at 6% is receivable annually in arrears. The bond is redeemable at the end of Year 3 at a premium of 3% to par value. The financial asset is measured at Amortised cost.
The effective interest rate of the financial instrument is 8.1% which is based on the internal rate of return of the future cash flows.
What is the amount of the Financial Asset on Entity A's Statement of Financial Position as at the end of Year 2?
What is the amount of the Interest Expense on Entity A's Statement of Profit or Loss for Year 3?