On January 1, 2019, Ramen Company purchased P1,000,000, 12% bonds of Tamago Company for P1,063,394, 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, Ramen sold P600,000 face value bonds at 101 plus accrued interest. Market value of the bonds on different dates is as follows: December 31, 2019 108 December 31, 2020 106 December 31, 2021 104 Assume that the debt investment is intended to speculate on fluctuations of interest or fair value and is held for trading. 1.1 How much is the interest income for the year ended December 31, 2019? A. P127,607 B. P120,000 C. P106,399 D. P100,000 1.2 What amount of gain or loss should Ramen report on the sale of the bond investment on April 1, 2021? A. P30,000 gain B. P30,000 loss C. P12,344 gain D. P12,344 loss 1.3 At what amount should the bond investments be shown on December 31, 2020 and December 31, 2021 statement of financial position? A. P1,000,000 and P400,000 C. P1,034,706 and P1,018,177 B. P1,000,000 and P416,000 D. P1,060,000 and P416,000
On January 1, 2019, Ramen Company purchased P1,000,000, 12% bonds of Tamago Company for P1,063,394, 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, Ramen sold P600,000 face value bonds at 101 plus accrued interest. Market
value of the bonds on different dates is as follows:
December 31, 2019
108
December 31, 2020
106
December 31, 2021
104
Assume that the debt investment is intended to speculate on fluctuations of interest or fair value and is
held for trading.
1.1 How much is the interest income for the year ended December 31, 2019?
A. P127,607
B. P120,000
C. P106,399
D. P100,000
1.2 What amount of gain or loss should Ramen report on the sale of the bond investment on April 1, 2021?
A. P30,000 gain
B. P30,000 loss
C. P12,344 gain
D. P12,344 loss
1.3 At what amount should the bond investments be shown on December 31, 2020 and December 31, 2021
of financial position
A. P1,000,000 and P400,000
C. P1,034,706 and P1,018,177
B. P1,000,000 and P416,000
D. P1,060,000 and P416,000
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