Answered: How much is the gain (loss) on…

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

On January 1, 20x1, Dagul Co. acquired 10%, ₱4,000,000 bonds for ₱3,807,853. The principal is
due on January 1, 20x4 but interest is due annually starting December 31, 20x1. The yield rate
on the bonds is 12%. On July, 1 20x1, Dagul Co. changed its business model. It was ascertained
that the investment in bonds at amortized cost should be reclassified to held for trading securities
on reclassification date. The bonds were quoted at 102, 103 and 104 on July 1, 20x1, December
31, 20x1 and January 1, 20x2, respectively. How much is the gain (loss) on reclassification on
January 1, 20x2?

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