On January 1, 2016, Star Company received P107,720 for a P100,000 face amount, 12% bond, a price that yields 10%.  The bonds pay interest semi-annually.  The entity elects the fair value option for valuing financial liabilities.  On December 31, 2016, the fair value of the bond is determined to be P106,460.  The entity recognized interest expense of P12,000 in the 2016 income statement.  What was the gain or loss recognized in the income statement to report this bond at fair value?     13,260 loss 12,000 loss 6,460 gain 1,260 gain

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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On January 1, 2016, Star Company received P107,720 for a P100,000 face amount, 12% bond, a price that yields 10%.  The bonds pay interest semi-annually.  The entity elects the fair value option for valuing financial liabilities.  On December 31, 2016, the fair value of the bond is determined to be P106,460.  The entity recognized interest expense of P12,000 in the 2016 income statement.  What was the gain or loss recognized in the income statement to report this bond at fair value?
 
 
13,260 loss
12,000 loss
6,460 gain
1,260 gain
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