Reference no: EM132943946

Questions -

Q1. On January 1, 2020, Diamond Company purchased P5,000,000 face amount 8% bonds for P4,562,000 to be held. The bonds were purchased to yield 10% interest. The bond matures on January 1, 2026 and pays interest annually on December 31. The interest method of amortization is used. On July 1, 2021, P1,000,000 face value bonds were sold at 105 plus accrued interest. The bonds have fair market value of 98 and 101 for the years 2020 and 2021 respectively. How much is gain (loss) from selling the bonds?

a. (279,822)

b. 279,822

c. (230,910)

d. 230,910

Q2. Refer to the information in Question No. 1. How much is the interest income for the year 2022?

a. 320,000

b. 374,525

c. 379,978

d. 385,975

Q3. Refer to the information in Question No. 1. Assuming the investment in bonds qualifies to be accounted as financial assets at fair value through other comprehensive income. How much is the unrealized gain (loss) at the end of 2019?

a. 381,800

b. (381,800)

c. 281,800

d. (281,800)

Q4. Refer to the information in Question No. 1. Assuming that Diamond Company chooses the fair value option in accounting investment in bonds. How much is the carrying amount of the bonds presented on the Statement of Financial Position for 2021?

a. 5,000,000

b. 5,050,000

c. 4,000,000

d. 4,040,000