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Adam PLC has two investments. One, an investment in listed shares, is available for sale...

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Finance

  1. Adam PLC has two investments. One, an investment in listed shares, is available for sale as a financial asset. The current market value is 405,000 but the shares were bought for 675,000. The other is an investment in a three year bond with an amortised cost of 450,000 with a stated and effective interest rate of 7% (current market rates are 10%). After two years Meow Plc is not expecting to receive the last years interest and expects to receive only 2/3 of the principal.

What is impairment? What impairment should be recorded in the accounts of Adam PLC for the listed shares and the three year bond? (8Mark)

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