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What is the compound journal entry to reclassify the asset

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Reference no: EM132918288

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Q1. On Jan. 1, 2021, an entity bought investment in bonds and classified it as an investment at amortized cost. It has a total face value of P5,000,000 and an acquisition cost of P5,088,700. It pays an interest rate of 6%, to be paid semiannually every June 30 and Dec. 31. It matures on Dec. 31, 2024. The acquisition resulted to an effective interest rate of 5.5%. On Dec. 31, 2021, the bonds have a total fair value of P5,010,000. Compute for the following:

a. Investment in Bonds as of acquisition

b. Interest income for the year

c. Unrealized Holding Gain/Loss through P/L for year 2021

d. Investment in Bonds as of Dec. 31, 2021

e. If in 2021, there was a change in business model to trading purposes, what is the journal entry to reclassify the asset?

Q2. On Jan. 1, 2021, ABC bought serial bonds with a face value of P2,400,000 for P2,160,000 cash. The investment will be accounted for as a financial asset at amortized cost. It will be paid in installments of P800,000 plus 10% interest on the outstanding balance every Dec. 31, 2021. On Dec. 31, 2021, the remaining bonds have a fair value of PP1,550,000. Compute for the following:

a. Investment in Bonds as of acquisition

b. Interest income for the year

c. Unrealized Holding Gain/Loss through P/L for year 2021

e. Investment in Bonds as of Dec. 31, 2021

Q3. On Jan. 1, 2021, an entity bought an investment in bonds with a face value of P3,000,000 for P2,946,500. The investment was recorded as a financial asset at fair value through OCI. It pays an interest rate of 7% to be paid every Dec. 31. It matures on Dec. 31, 2022. On Dec. 31, 2021, the bonds have a total fair value of P2,970,000. Compute for the following:

a. Investment in Bonds as of acquisition

b. Interest income for the year

c. Unrealized Holding Gain/Loss through OCI for year 2021

d. Investment in Bonds as of Dec. 31, 2021

e. If in 2021, there was a change in business model to holding the investment until maturity only, what is the compound journal entry to reclassify the asset and update relevant accounts?

Reference no: EM132918288

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