Finn plc ("Finn") entered into the following transaction during the year ended 31
December 2016:
Finn purchased 2 million £1 4% bonds on the 1 January 2016 at a discount of 10%.
Transaction costs incurred by Finn were £200,000. The bonds will be redeemed at a
20% premium on the 31 December 2019. The effective interest rate is 7.3%.
Required:
Prepare the journal entries for:
 Initial recognition of the bond at 1 January 2016;
 Recognition of interest in 2016; and
 Redemption of the investment in 2019.
2.2 Finn also entered into a forward contract on 30/6/16 to purchase $500,000 at
£/$0.67 on 31/3/2017. On the 31/12/16, the forward rate is £/$0.70 on 31/3/17.
Finn’s borrowing rate is 5%.
Required:
 Determine the fair value of the forward contract on the 31/12/16; and
 Prepare the journal entry to record the change in fair value on the 31/12/16
(assuming cash flow hedge accounting).