Reference no: EM132977081
Question - On July 1, 2021, ABC Company acquired 8%, P 2,000,000 bonds dated January 1, 2021 at 95. The interest is payable semi-annually every June 30 and December 31. The principal is due on December 31, 2023. ABC Company paid transaction cost of P65,000 related to the acquisition of the bonds. The bonds are initially measured at amortized cost. Based on ABC Company's estimates of risks and default losses, the expected credit losses (12-month ECL) of the bonds on July 1, 2021 amounted P16,000. The loss allowance amounted to P21,000 and P10,000 as of December 31, 2021 and December 31, 2022, respectively.
ABC Company uses a calendar year period and reports only on an annual basis. On July 1, 2022, ABC Co. changes its business model.
The bond's fair values are as follows:
-December 31, 2021 P 2,050,000
-January 1, 2022 2,070,000
-December 31, 2022 2,220,000
-January 1, 2023 2,230,000
Required -
What is the gross carrying amount of the bonds upon initial recognition?
What is the net carrying amount of the bonds as of December 31, 2021?
What is the gross carrying amount of the bonds as of December 31, 2022?
Assume that the bonds are reclassified to financial assets measured at FVPL. What is the gross carrying amount of the bonds on the reclassification date?
Assume that the bonds are reclassified to financial assets measured at FVPL. What is the net carrying amount of the bonds upon reclassification?
How much is the gain or loss on reclassification?