answer pls ty ABC Corporation acquired P2,000,000 bonds of X Company on January 1, 2022 when the prevailingmarket rate on similar instruments was at 12%. The bonds will be accounted as a financial asset atamortized cost. Transaction costs were also incurred in the purchase, resulting to a new effectiveinterest rate of 9%. The bonds pay interest of 10% every June 30 and December 31 and will mature onDecember 31, 2025. The fair value of the bonds at year-end are presented below:December 31, 2022December 31, 2023December 31, 2024December 31, 2025991021031011. What is the amount of transaction costs capitalized to the investment in bonds on January 1, 2022?2. What is the total interest income to be recognized on the investment in bonds in 2023?3. What is the carrying value of the investment in bonds on December 31, 2023?4. After receipt of interest, half of the investment in bonds were sold at fair value on December 31, 2024.What is the gain or loss on sale of investment to be recognized in the income statement for 2024?(Indicate if gain or loss)

Transaction costs or the bond issue costs are the expenses that are incurred by the company for…

Answered: curred in the purchase, resul % every…

Business

Accounting

curred in the purchase, resul % every June 30 and Decembe t year-end are presented belov 99

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

100%

answer pls ty

ABC Corporation acquired P2,000,000 bonds of X Company on January 1, 2022 when the prevailing
market rate on similar instruments was at 12%. The bonds will be accounted as a financial asset at
amortized cost. Transaction costs were also incurred in the purchase, resulting to a new effective
interest rate of 9%. The bonds pay interest of 10% every June 30 and December 31 and will mature on
December 31, 2025. The fair value of the bonds at year-end are presented below:
December 31, 2022
December 31, 2023
December 31, 2024
December 31, 2025
99
102
103
101
1. What is the amount of transaction costs capitalized to the investment in bonds on January 1, 2022?
2. What is the total interest income to be recognized on the investment in bonds in 2023?
3. What is the carrying value of the investment in bonds on December 31, 2023?
4. After receipt of interest, half of the investment in bonds were sold at fair value on December 31, 2024.
What is the gain or loss on sale of investment to be recognized in the income statement for 2024?
(Indicate if gain or loss)

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