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How much is the interest receivable to be recognized on dec

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Reference no: EM132942859

On March 1, 2020, WHITE Corporation purchased bonds with face amount of P5,000,000. The entity paid P4,585,000 plus transaction cost of P157,000. The bonds mature on February 28, 2022 and pay 6% interest annually on February 28 of each year with 8% effective yield. The bonds are quoted at 105 on December 31, 2020. The bonds are sold at 108 on June 30, 2021.

REQUIREMENTS:
Assuming the investment is appropriately recognized as financial assets at amortized cost:

Problem 1: Determine the initial valuation of the investment.

Problem 2: How much interest income is to be recognized on December 31, 2020?

Problem 3: How much is the interest receivable to be recognized on December 31, 2020?

Problem 4: What is the carrying value of the investment on December 31, 2020?

Problem 5: Determine the gain or (loss) to be recorded upon the sale of the investment.

Problem 6: How much interest income is to be recognized in 2021?

Reference no: EM132942859

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