An entity purchased 4-year debt instruments with a face value of P10,000,000 on January 1, 2019 to collect contractual cash flows that are solely payments of principal and interest. Interest is paid annually at a nominal rate of 10% that is paid every December 31. The following information is provided as follows: Date Effective Rate without Transaction Cost Effective Rate with Transaction Cost 01/01/2019 12% 13% 12/31/2019 14% 14.50% 12/31/2020 11% 11.50% 12/31/2021 9% 9.50% 12/31/2022 10.5% 11% Requirements: What is the initial carrying amount of the bond investment? What is the 2020 interest income? What is the December 31, 2020 carrying amount? If the entity changes its business model in 2020 to both collect contractual cash flows and to sell the financial asset, what is the unrealized gain or loss in equity on December 31, 2021? If the entity changes its business model in 2020 to both collect contractual cash flows and to sell the financial asset, what is the unrealized gain or loss in comprehensive income on December 31, 2021? If the entity changes its business model in 2020 to hold the financial asset for trading purposes, what is the total or net amount recognized in profit or loss in 2021?
An entity purchased 4-year debt instruments with a face value of P10,000,000 on January 1, 2019 to collect contractual cash flows that are solely payments of principal and interest. Interest is paid annually at a nominal rate of 10% that is paid every December 31. The following information is provided as follows: Date Effective Rate without Transaction Cost Effective Rate with Transaction Cost 01/01/2019 12% 13% 12/31/2019 14% 14.50% 12/31/2020 11% 11.50% 12/31/2021 9% 9.50% 12/31/2022 10.5% 11% Requirements: What is the initial carrying amount of the bond investment? What is the 2020 interest income? What is the December 31, 2020 carrying amount? If the entity changes its business model in 2020 to both collect contractual cash flows and to sell the financial asset, what is the unrealized gain or loss in equity on December 31, 2021? If the entity changes its business model in 2020 to both collect contractual cash flows and to sell the financial asset, what is the unrealized gain or loss in comprehensive income on December 31, 2021? If the entity changes its business model in 2020 to hold the financial asset for trading purposes, what is the total or net amount recognized in profit or loss in 2021?
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter13: Investments And Long-term Receivables
Section: Chapter Questions
Problem 3MC: On July 1, 2019, Aldrich Company purchased as an available-for-sale security 200,000 face value, 9%...
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An entity purchased 4-year debt instruments with a face value of P10,000,000 on January 1, 2019 to collect contractual
| Date | Effective Rate without Transaction Cost | Effective Rate with Transaction Cost |
| 01/01/2019 | 12% | 13% |
| 12/31/2019 | 14% | 14.50% |
| 12/31/2020 | 11% | 11.50% |
| 12/31/2021 | 9% | 9.50% |
| 12/31/2022 | 10.5% | 11% |
Requirements:
- What is the initial carrying amount of the bond investment?
- What is the 2020 interest income?
- What is the December 31, 2020 carrying amount?
- If the entity changes its business model in 2020 to both collect contractual cash flows and to sell the financial asset, what is the unrealized gain or loss in equity on December 31, 2021?
- If the entity changes its business model in 2020 to both collect contractual cash flows and to sell the financial asset, what is the unrealized gain or loss in comprehensive income on December 31, 2021?
- If the entity changes its business model in 2020 to hold the financial asset for trading purposes, what is the total or net amount recognized in profit or loss in 2021?
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