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What amount should the investment be reported in the company

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On January 1, 2014, Sun Company purchased the debt instruments of Silk Company with a face value of P5,000,000 bearing interest rate of 8% for P4,621,006 to yield 10% interest per year. The bonds mature on January 1, 2019 and pay interest annually on December 30. On December 31, 2014 the fair value of the investment is P4,838,014 99 which is based on the prevailing market rate of 9%.

Problem 1: If the company's business model has the objective of trading and making a profit from changes in the fair value of the securities, what amount of unrealized gain or loss should the company disclose in their December 31, 2014 profit or loss?

Problem 2: If the company's business model has the objective of collecting all the contractual cash flows including interest and principal, at what amount should the investment be reported in the company's statement of financial position for the year ended December 31, 2014?

Reference no: EM132844199

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