Reference no: EM132772496
On January 1, 2020, BROKER Inc. acquired bonds of BDO Inc. The bonds are purchased for P3,100,000. BROKER Inc. incurred transaction costs totaling P49,211. The bonds have face value of P3,000,000 payable at the end of its three-year term. Interest of 12% is payable annually every December 31. The applicable effective rate of the bonds is 10%. On December 31, 2020, the bonds of BDO are traded in the exchange market at 110. On January 1, 2021, BROKER Inc. sold the bonds of BDO for 105 less disposal cost of P20,000.
Problem 1: What is the interest income for the year ended December 31, 2020, if the business model of the entity is to sell the bonds to obtain short-term profit gain or loss?
a. P314,921
b. P310,000
c. P300,000
d. P360,000
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