Reference no: EM132951073
Richman Co. purchased P300,000 of 8%, 5-year bonds from Carlin, Inc. on January 1, 2022, with interest payable on July 1 and January 1. The bonds sold for P312,474 at an effective interest rate of 7%. The business model of Richman is both to collect contractual cash flows arising from principal and interests and sell financial assets.
Using the effective interest method, Richman Co. decreased the non-trading Debt Investments account for the Carlin, Inc. bonds on July 1, 2022 and December 31, 2022 by the amortized premiums of P1,062 and P1,098, respectively. At December 31, 2022, the fair value of the Carlin, Inc. bonds was P318,000.
Problem 1: What should Richman Co. report as unrealized gain to other comprehensive income for the year 2022?
A. P2,160
B. 5,526
C. P0
D. P7,686
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