Prepare the entries in the books of Raffy for years

Reference no: EM132840364

Problem - On June 1, 2020, Raffy Company purchased for P5,353,150 (including transaction costs) plus accrued interest P5,000,000, 12% bonds of Blessie Corporation. Raffy's business model for managing the debt investments is both collecting cash flows that are payment for principal and interest and selling the instruments when opportunity arises. Raffy did not exercise its option to recognize the change in fair value in profit or loss. The bonds, which mature on December 31, 2024 pay interest annually on December 31. Using a financial calculator and an Excel worksheet, the yield is computed at 10%.

On September 1, 2023, Raffy Corporation sold P3,000,000 of the bonds at 103 plus accrued interest. The bonds are quoted in the market at the following prices, at selected dates.

June 1, 2020 106 December 31, 2022 104

December 31, 2020 107 September 1, 2023 103

December 31, 2021 105 December 31, 2023 -102

Required - Prepare the entries in the books of Raffy for years 2020 through 2023 as a result of the foregoing. (Raffy Company reports on a calendar year basis).

Reference no: EM132840364

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