An entity invests in a 10-year bond with a face value of ₹ 6,00,000 by paying ₹ 2,31,500. The effective rate of interest is 10%. An entity…
CA Final · Financial Reporting · MTP · November 2026
An entity invests in a 10-year bond with a face value of ₹ 6,00,000 by paying ₹ 2,31,500. The effective rate of interest is 10%. An entity recognises proportionate interest income in its statement of profit and loss over the period of bond. Required (i) How the interest income will be treated in the statement of cash flows during the period of bond? (ii) How the maturity proceeds of ₹ 6,00,000 will be treated in the statement of cash flows? Note: The entity is not in the business of dealing in securities.
Suggested Answer and Working Notes:
Since the entity is not in the business of dealing in securities, a sum of ₹2,31,500 invested in a bond will be classified as investing activities. There is no cash flow of interest during bond period, as there is no cash receipt. On maturity, proceeds of ₹ 6,00,000 will be classified as receipt under investing activity with a bifurcation of ₹ 3,68,500 as interest and ₹ 2,31,500 as proceeds towards redemption of bond.
Topics: Ind AS 7
Related Questions in this Topic
- The following details of P Ltd. pertain to the year ended 31st March 20X2: Paid lease liabilities (principal portion):...
- An entity invests in a 10-year bond with a face value of 6,00,000 by paying - 2,31,500. The effective rate of interest i...
- Alaap Ltd.'s directors feel that the company needs a significant injection of capital in order to modernize plant and eq...
- Following is the balance sheet of Kuber Limited for the year ended 31 March, 20X2 20 X2 20 X1 ASSETS ...
- A Ltd., whose functional currency is Indian Rupee, had a balance of cash and cash equivalents of 2,00,000, but no trade ...