Reference no: EM132799781
Question - DEBT INVESTMENTS
On December 31, 2018, Nikka Corporation purchased P2,000,000, 8% bonds of Rex Company when the prevailing rate of interest was at 10%. Interest is collectible every December 31 starting 2019. The bonds will mature on December 31, 2023. The prevailing rate of interest was at 11%, 9%, 12% at the end of 2019, 2020 and 2021, respectively. While the bonds were quoted at 102, and 97 at the end of 2019 and 2021, respectively. The entity's business model is to sell the bonds for short term profit.
Q1. How much is the unrealized gain (loss) in profit or loss in 2019?
a. P191,631
b. P90,626
c. P201,326
d. P102,641
Q2. How much is the unrealized gain (loss) in profit or loss in 2020?
a. P191,631
b. P90,626
c. P201,326
d. P102,641 3.
Q3. How much should the investment be reported in 2020 financial statement?
a. P2,040,000
b. P1,949,374
c. P1,940,000
d. P1,900,526
Q4. Assuming that the business model is to collect contractual cash flows and to sell the bonds when circumstances warrants, what amount of unrealized gain (loss) is reported in 2020 statement of comprehensive income?
a. P166,794
b. P48,848
c. (P117,946)
d. (P90,626)
Q5. Assuming that the business model is to collect contractual cash flows and to sell the bonds when circumstances warrants, how much should the investment be reported in 2020 financial statement?
a. P2,040,000
b. P1,949,374
c. P1,940,000
d. P1,900,526
Q6. Assuming that the business model is to collect contractual cash flows, how much should the investment be reported in 2020 financial statement?
a. P2,040,000
b. P1,949,374
c. P1,940,000
d. P1,900,526
On January 1, 2018, Jackson Co. purchased 10% P700,000 bonds at 95 when the prevailing market interest rate is at 12%. The bonds mature after 5 years and pay interest beginning January 1, 2019. Commission paid on the acquisition amounted to P9,129. Adjusted effective interest after transaction cost is 11%.
On July 1, 2021, the bonds were sold at a total proceeds of P770,000. The effective interest rates on as of the end of year are as follows:
December 31, 2018 10%
December 31, 2019 12%
December 31, 2020 9%
Q7. If the bonds is classified as FVTPL, what is the interest income in 2019?
a. P70,000
b. P79,800
c. P74,611
d. P80,976
Q8. If the bonds is classified as FVTOCI, what is the amount reported in OCI in 2019?
a. (P33,626)
b. P21,717
c. (P16,520)
d. (P38,237)
Q9. If the bonds is classified as FVTPL, what is the gain (loss) on sale of bonds in 2021?
a. P22,686
b. P44,146
c. P57,686
d. P79,146
Q10. If the bonds is classified as FVTOCI, what is the gain (loss) on sale of bonds in 2021? a. P22,686
b. P44,146
c. P57,686
d. P79,146
On April 1, 2019 Jay Sy Co. purchased bond investment. Jay Sy Co. account for this investment is to collect contractual cash flows and to sell when circumstances warrants. Jay Sy Co. paid other directly attributable cost of P10,160 to acquire the investment. The bond after transaction cost will yield 5% interest over 6 years. Effective interest at the end of 2019, 2020 and 2021 were 3%, 5% and 6%, respectively. While the quoted price of the bonds at the end of 2020 is at 99. Jay Sy Co. reported interest income of P7,881, amortization of P1,119 and cumulative balance in OCI of P19,707 at the end of 2019.
Q11. How much is the total amount paid to purchase the bonds?
a. P196,489
b. P200,000
c. P210,160
d. P212,614
Q12. How much should the asset be reported in 2019 financial statement?
a. P209,041
b. P228,748
c. P201,610
d. P230,481
Q13. How much is the amount recognized in other comprehensive income in 2020?
a. P19,707
b. (P9,516)
c. (P29,203)
d. P0
Q14. How much is the interest income in 2020?
a. P10,456
b. P10,531
c. P15,707
d. P18,278