On April 1, 20x1, Ronald Ryan Co. acquired 12%, P4,000,000 bonds dated January 1, 20x1 at 98 including interest. The bonds mature on December 31, 20x3 but pays annual interest at each year-end. How much is the initial carrying amount of the investment? a. 3,920,000 b. 3,800,000 c. 4,000,000 d. 4,120,000
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1. On April 1, 20x1, Ronald Ryan Co. acquired 12%, P4,000,000 bonds dated January 1, 20x1 at 98 including interest. The bonds mature on December 31, 20x3 but pays annual interest at each year-end. How much is the initial carrying amount of the investment?
a. 3,920,000
b. 3,800,000
c. 4,000,000
d. 4,120,000
2. On January 1, 20x1, Mitch Co. acquired 12%, P4,000,000 bonds at 98. Commission paid to brokers amounted to P204,000. Principal is due on December 31, 20x4 but interest payments are made annually starting December 31, 20x1. The adjusted effective interest rate on the investment is closest to
a. 12%
b. 11%
c. 10.2650%
d. indeterminable
3. Use the following information for the next three questions:
On January 1, 20x1, ABC Co. acquired 10%, ₱1,000,000 bonds for ₱827,135. The bonds mature on December 31, 20x3 and pay annual interest every December 31. ABC Co. incurred transaction costs ₱80,000 on the acquisition. The effective interest rate adjusted for the effect of the transaction costs is 14%. The bonds are to be held under a “hold to collect and sell” business model. Information on fair values is as follows:
December 31, 20x1…………………………….98
December 31, 20x2……………………………102
December 31, 20x3……………………………100
How much is the carrying amount of the investment on December 31, 20x1?
a. 935,134
b. 1,002,000
c. 980,000
d. 965,443
4. How much is the unrealized gain (loss) recognized in other comprehensive income on December 31, 20x1?
a. 45,866
b. (45,866)
c. (37,899)
d. 0
5. How much is the interest income recognized in 20x2?
a. 126,999 c. 135,088
b. 130,779 d. 144,388
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