Reference no: EM132877782
Questions -
Q1. Hawk Company purchased 8,000, P1,000 face value, 9% bonds to yield 10%. The carrying amount of the bonds on January 1, 2015 was P7,800,000.
The bonds mature on June 30, 2018and pay interest semi-annually on June 30 and December 31.
The entity sold 4,000 bonds on March 1, 2015 for P3,920,000 after the interest has been received.
What amount should be recognized as gain on sale of bonds?
a. 25,000 b.20,000 c. 15000 d. 0
Q2. Oblivion Co. purchased bonds at a discount of P100,000. Subsequently, the entity sold these bonds at a premium of P140,000.
During the period that the entity held this investment, amortization of the discount amounted to P20,000.
What should be reported as gain on sale of bonds?
a. 120000 b. 220000 c. 240000 d. 260000
Q3. On January 1, 2019, Mirage Company acquired P4,000,000 of 12% face amount bonds for P3,767,000 to be held as financial assets at amortized cost with a 14% effective yield.
Interest on bonds is payable annually on December 31 and the bonds mature on January 1, 2023.
The effective interest method of amortization is used.
What is the carrying amount of the bond investment on December 31, 2019?
A. P3,814,380 B. P3,767,000 C. P4,000,000 D. P3,719,620
Q4. On January 1, 2019, Paradox Company purchased 9% bonds with a face amount of P4,000 for P3,756,000 to yield 10%.
The bonds are dated January 1, 2019, mature on December 31, 2028, and pay interest annually on December 31. The bonds are measured at amortized cost.
What amount should be reported as interest revenue for 2019?
A. 400000 B. 344400 C. 360000 D. 375600
Q5. On July 1, 2019, Conair Company paid P1,198,000 for 10% bonds with a face amount of P1,000,000 to be held as financial assets at amortized cost.
Interest is paid on June 30 and December 31. The bonds were purchased to yield 8%. The entity used the effective interest method.
What is the carrying amount of the bond investment on December 31, 2019?
A. 1207900 B. 1198000 C. 1195920 D. 1193050
Q6. On January 1, 2019, Dumaguete Company purchased bonds with face amount of P4,000,000 for P4,206,000. 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 also to sell the bonds in the open market.
The entity has not elected the fair value option of measuring financial asset. The bonds mature on December 31, 2021 and pay 10% interest annually on December 31, 2019 each year with 8% effective yield.
The bonds are quoted at 95 on December 31,2019 and 90 on December 31, 2020.
6.1 What is the amount of unrealized loss should be reported as component other comprehensive income in 2019?
A. 342480 B. 406000 C. 469520 D. 0
6.2 What amount of unrealized loss should be reported as component of other comprehensive income in 2020?
A. P473,878 B. P131,398 C. P200,000 D. 0
6.3 What amount of cumulative unrealized loss should be reported in the statement of changes in equity on December 31, 2020?
A. 406000 B. 606000 C. 473878 D. 0
6.4 What is the carrying amount of the bond investment to reported on December 31, 2020?
A. 4206000 B. 3600000 C. 3800000 D. 4673878
Q7. On January 1, 2019, Gelyka Company purchased 12% bonds with face amount of P5,000,000 for P5,500,000 including transaction cost P100,000.
The bonds provide an effective yield of 10%. The bonds are dated January 1, 2019 and pay interest annually on December 31 or each year.
The bonds are quoted at 115 on December 31, 2019. The entity has irrevocably elected to use the fair value option.
7.1 What amount of gain from change in the fair value should be reported for 2019?
A. 750000 B. 250000 C. 350000 D. 0
7.2 What amount of interest income should be reported for 2019?
A. 600000 B. 550000 C. 660000 D. 540000
7.3 What is the carrying amount of the bond investment on December 31, 2019?
A. 5750000 B. 5400000 C. 5500000 D. 5450000
7.4 What total amount of income from the investment should be reported in the income statement for 2019?
A. 540000 B. 950000 C. 890000 D. 900000
Q8. On July 1, 2020, Quagmire Company purchased 5000000 face amount, 8% bonds for 4615000 to yield 10% per year to be held as financial assets at amortized cost.
The bonds pay interest semi-annually on January 1 and July 1.
On December 31, 2020, what amount should be reported as interest receivable?
A. 184600 B. 250000 C. 230750 D. 200000
Q9. On July 1, 2016, Vicar Company purchased P1,000,000 of 8% bonds for P946,000, including accrued interest of P40,000.
The bonds were purchased to yield 10% interest. The bonds mature on January 1. The entity uses interest method.
On December 31, 2016, what is the carrying amount of the bond investment?
a. 911,300 b.916,600 c.953300 d. 960600
Q10. On January 1, 2016, Pearl Company acquired P5,000,000 of 8% face value bonds at P4,562,000 to be held as financial assets at amortized cost with 10% effective yield.
Interest on bonds is payable annually on December 31 and the bonds mature on January 1, 2022. The effective interest method of amortization is used.
What is the carrying amount of the investment on December 31, 2017?
A. 4680000 B. 4662000 C. 4618200 D. 4562000
Q11. On July 1, 2020, Scheme Company acquired ten-year 8% with a face amount of P5,000,000 for P4,200,000 to be held as financial assets at amortized cost.
The bonds mature on June 30, 2028 and pay interest semi-annually on June 30 and December 31.
Using the interest method, the entity recorded discount amortization of P18,000 for the six months ended December 31, 2020.
What should be reported as interest income for 2020?
A. 168000 B. 182000 C. 200000 D. 218000