Reference no: EM133010782
On January 1, 2019, Woot Company purchased 12% bonds with face amount of P5,000,000 for P5,500,000 including transaction cost of P100,000. The bonds provide an effective yield of 10%.
- The bonds are dated January 1, 2019 and pay interest annually on December 31 of each year.
- The bonds are quoted at 115 and 112 on December 31, 2019 and December 31, 2020 respectively. New effective interest rate for 2020 is 8%. This bond was held for trading.
- The entity changed its business model into FVOCI on January 1, 2020.
Problem 1: How much is the interest income for 2020?
a. 550,000
b. 600,000
c. 460,000
d. 575,000
Problem 2: What is the value of the investment on December 31, 2020?
a. 5,750,000
b. 5,600,000
c. 5,610,000
d. 5,000,000