On January 1, 2019, JYP Company purchased P1,200,000, 14% bonds of PSY Company for P1,352,143, a price that yields 10%. Interest on these bonds is payable every December 31. The bonds mature on December 31, 2022. On April 1, 2021, to pay a maturing obligation, JYP sold P720,000 face value bonds at 101 plus accrued interest. Market value of the bonds on different dates is as follows: December 31, 2019 December 31, 2020 December 31, 2021 : Assume that the company intended to collect the principal and interest over the term of the bonds and did not choose the fair value option. What amount of gain or loss should be recognized on the sale of investments on April 1, 2021? What amount of interest income will be taken to profit or loss for the year ended December 31, 2021? At what amount should the bond investments be shown on December 31, 2021 statement of Financial Position. 112 108 105

On January 1, 2019, JYP Company purchased P1,200,000, 14% bonds of PSY Company for P1,352,143, a price that yields 10%. Interest on these bonds is payable every December 31. The bonds mature on December 31, 2022. On April 1, 2021, to pay a maturing obligation, JYP sold P720,000 face value bonds at 101 plus accrued interest. Market value of the bonds on different dates is as follows: December 31, 2019 December 31, 2020 December 31, 2021 : Assume that the company intended to collect the principal and interest over the term of the bonds and did not choose the fair value option. What amount of gain or loss should be recognized on the sale of investments on April 1, 2021? What amount of interest income will be taken to profit or loss for the year ended December 31, 2021? At what amount should the bond investments be shown on December 31, 2021 statement of Financial Position. 112 108 105

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, 2019, JYP Company purchased P1,200,000, 14% bonds of PSY Company for P1,352,143, a
price that yields 10%. Interest on these bonds is payable every December 31. The bonds mature on
December 31, 2022. On April 1, 2021, to pay a maturing obligation, JYP sold P720,000 face value bonds
at 101 plus accrued interest. Market value of the bonds on different dates is as follows:
December 31, 2019
December 31, 2020
December 31, 2021
:Assume that the company intended to collect the principal and interest over the term of the bonds and
did not choose the fair value option.
What amount of gain or loss should be recognized on the sale of investments on April 1, 2021?
What amount of interest income will be taken to profit or loss for the year ended December 31, 2021?
At what amount should the bond investments be shown on December 31, 2021 statement of Financial
Position.
112
108
105
: Assume that the bonds were classified as debt investments at fair value through profit or loss.
How much is interest income for the year ended December 31, 2019?
What amount of gain or loss should be reported on the sale of the bond investments in April 1, 2021?
At what amount should the bond investments be should on December 2021 statements of financial
position?

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