Reference no: EM132804260

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 debt investment 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. The yield is computed at 10%.

On September 1, 2023, Raffy Company 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:

Problem 1. Prepare the amortization table.

Problem 2. Prepare the entries on Raffy for years 2020 through 2023 as a result of the forgoing. (Raffy Company reports on a calendar year basis)