Reference no: EM132846202
Question - ABC Corp acquired a three-year, 12% bonds with a face value of P1,000,000 on January 1, 2019. The bonds which pay annual interest every December 31 had a 10% prevailing interest rate on the date of acquisition. The investment was appropriately classified as Available for Sale Security. The present value factor of P1 at 10%, ordinary annuity, for 3 periods is at 2.486852 while the present value factor of P1 at 10% for 3 periods is at 0.751315.
On December 31, 2019, the prevailing interest for similar securities is at 11%, thus the fair market value of the bonds is at P1,017,125.
On March 31, 2020, the bonds were sold at P1,250,000.
REQUIRED -
1. What is the unrealized holding gain loss to be recognized in the balance sheet as of December 31, 2019?
2. What is the correct interest income to be reported in the 2019 income statement?
3. How much is the correct realized gain or loss on sale of the investment in 2020?
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