Reference no: EM132918275
Question - On January 1, 2020, Marian Company purchased bonds with face amount of P4,000,000. The business model of the entity in managing the financial asset is to collect contractual cash flows that are solely payment of principal and interest and to sell the bonds in the open market.
The entity has not elected the fair value option of measuring financial assets. The bonds mature on December 31, 2022 and pay 10% interest annually on December 31 each year with 8% effective yield.
The bonds are quoted at 95 on December 31, 2020.
On June 30, 2021, the bonds are sold at 96 plus accrued interest.
A. What total amount of income from bond investment should be reported in 2020 statement of profit or loss?
B. What amount of gain or loss from sale of bond investment should be reported in 2021 statement of profit or loss?
C. What is the entry to record the sale of the bond investment?
D. Prepare other necessary journal entries and computations.
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