Reference no: EM133019169
Question - On January 1, 2020, Lion Company acquired 5-year bonds with a total face value of P5,000,000 for P5,379,079. The bonds carry an interest of 12% per year payable every December 31. The bonds are appropriately classified as held for trading. On December 31, 2020, the bonds are quoted at 104%.
On January 3, 2021, 1/2 of the bonds were sold at 105.
On November 1, 2021, Lion Company changed its business model. It was determined that the remaining investment in bonds should be reclassified to financial asset measured at amortized cost on reclassification date. On December 31, 2021, the bonds were quoted at 102.
On January 1, 2022, the bonds were quoted at 104.
Required -
-How much is the realized gain or loss on sale in 2021 to be recognized in the profit or loss?
-How much is the interest income for 2021?
-How much gain or loss on reclassification to be recognized in the profit or loss on January 1, 2022?
-Assume instead that the bonds are reclassified to FVOCI, how much is the gain or loss on reclassification to be recognized in the profit or loss on January 1, 2022?
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