Reference no: EM132950168
Question - On January 1, Year 1, Grow Company purchased P1,000,000 12% bonds of Glow Company for P1,063,394, a price that yields 10%. Interest on these bonds is payable every December 31. The bonds mature on December 31, Year 4. On April 1, Year 3, to pay a maturing obligation, Grow sold P600,000 face value bonds at 101 plus accrued interest. Market value of the bonds on different dates is as follows:
December 31, Year 1 - 108
December 31, Year 2 - 106
December 31, Year 3 - 104
Requirement -
a) Assume that the bonds were classified as debt investments at fair value through profit or loss.
1. How much is interest income for the year ended December 31, Year 1?
2. What amount of gain or loss should Grow report on the sale of the bond investments on April 1, Year 3?
3. At what amount should the bond investments be shown on December 31, Year 2 and December 31, Year 3 statement of financial position?
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