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What amount should be reported as interest income

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On January 1, 2020, Knit Company purchased 8% bonds in the face amount of P8,000,000. The bonds mature on January 1, 2024, and were purchased for P8,670,000 to yield 6%. Interest is payable every December 31.

The business model for this investment is to collect contractual cash flows and sell the bonds in the open market

                                             Fair Value                Effective rate

December 31, 2019          7,740,000                       9%

December 31, 2020        7,230,000                           12%

On December 31, 2020, the entity changed the business model to collect contractual cash flows only. On January 1, 2021, the fair value of the bonds did not change

Problem 1: What amount should be reported as interest income for 2019?

Reference no: EM132817074

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