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Simba (Pty) Ltd purchased debentures in Town (Pty) Ltd on 1 January 2021 at a...

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Accounting

Simba (Pty) Ltd purchased debentures in Town (Pty) Ltd on 1 January 2021 at a fair value of R169519.
The face of the debentures is R115000, and interest is paid annually in arrears at a coupon rate of 20% per annum.
The debentures will be redeemed at a premium of R34500 on 31 December 2023. The subsequent fair values of the
debentures were as follows:
31 December 2021 and 1 January 2022
31 December 2022 and 1 January 2023
The debentures have never been credit-impaired and there have been no significant increases in the credit risk of
the debentures since their initial recognition. Expected credit losses were estimated as:
The debentures were classified at amortised cost on initial recognition but need to be reclassified to fair value
through other comprehensive income (FVOCI-debt). The reason for the reclassification is that on 1 September 2021,
Revolution purchased another business, which was immediately, tasked with managing the debentures as part of
one of its portfolios of assets. The portfolio is managed to simply collect the contractual cash flows.
Task:
Show the journals for the year ended 31 December 2021 and 31 December
(40 Marks)
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