On January 2, 2021, Santos Company invested in a 4 -year, 10% bond with face value of P6,000,000 in which interest is to be paid every December 31. The bond has an effective interest rate of 9% and was acquired at prevailing rate of interest. On December 31, 2021, the bond has fair value of P6,229,862, which is based on prevailing rate of interest of 8.5%. Assume that on the date of acquisition the debt investment was designated as investment at amortized cost but reclassified on January 1, 2022 due to changes in business model as investment at FVTPL, what amount of gain (loss) should the company recognized on the date of reclassification?

On January 2, 2021, Santos Company invested in a 4 -year, 10% bond with face value of P6,000,000 in which interest is to be paid every December 31. The bond has an effective interest rate of 9% and was acquired at prevailing rate of interest. On December 31, 2021, the bond has fair value of P6,229,862, which is based on prevailing rate of interest of 8.5%. Assume that on the date of acquisition the debt investment was designated as investment at amortized cost but reclassified on January 1, 2022 due to changes in business model as investment at FVTPL, what amount of gain (loss) should the company recognized on the date of reclassification?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

On January 1, 2019, Caldereta Company purchased bonds with a face value of P3,000,000 for P3,108,000 to yield 12%. The bonds are due on December 31, 2023 and carry a 13% interest rate. Interest is receivable annually on December 31. The bonds were initially recorded at amortized cost. On June 30, 2020, one-half of the bonds were sold for P1,595,000 plus accrued interest. After the disposal, the company changed its business model for managing its financial assets and is now actively trading its portfolio. At December 31, 2020, the bonds were quoted at 101. What is the gain on the sale of the bond investment?A. P95,000B. P54,291C. P49,250D. P41,000
Domestic
On January 1, 2020, Pine Co. issued 10%, 10-year bonds with a face value of $12,000,000. The bonds were issued for $13,620,000 to yield 8%. Interest is payable annually on December 31. Pine amortizes bond premium using the effective-interest method. The bond premium reported on Pine’s balance sheet dated December 31, 2020, would be
On January 1, 2021, ABC Inc issued for P939,000 one thousand units of its 9%, P1,000 bonds. The bonds were issued to yield 10%. The bonds are dated January 1, 2021, and mature on December 31, 2031. ABC uses the effective interest method of amortizing bond discount. How much should ABC report as unamortized bond discount in its December 31, 2021 statement of financial position?
On January 1, 2023, Toyota Corporation purchased a newly issued $1,025,000 bond. The bond matured on December 31, 2025, and paid interest at 6% every June 30 and December 31. The market interest rate was 8%. Toyota's fiscal year-end is October 31, and the company had the intention and ability to hold the bond until its maturity date. The bond will be accounted using the amortized cost model.Click here to view Table A.2 - PRESENT VALUE OF 1 - (PRESENT VALUE OF A SINGLE SUM)Click here to view Table A.4 - PRESENT VALUE OF AN ORDINARY ANNUITY OF 1 (a) Calculate the price paid for the bond using a financial calculator or Excel functions. (Round answers to 2 decimal places, e.g. 52.75.) b) Prepare an amortization schedule for the bond. (Round answers to 2 decimal places, e.g. 52.75.) c). Prepare the journal entries on the books of Toyota Corporation for each of the following dates. (Round answers to 2 decimal places, e.g. 52.75. Credit account titles are automatically indented when the…
On January 1, 2023, Teal Corporation purchased a newly issued $1,425,000 bond. The bond matured on December 31, 2025, and paid interest at 6% every June 30 and December 31. The market interest rate was 8%. Teal's fiscal year-end is October 31, and the company had the intention and ability to hold the bond until its maturity date. The bond will be accounted using the amortized cost model. Click here to view Table A.2 - PRESENT VALUE OF 1- (PRESENT VALUE OF A SINGLE SUM) Click here to view Table A.4 - PRESENT VALUE OF AN ORDINARY ANNUITY OF 1 (a) X Your answer is incorrect. Calculate the price paid for the bond using a financial calculator or Excel functions. (Round answers to 2 decimal places, e.g. 52.75.) PV $ -1062917.95 4
On March 1, 2024, Baddour, Incorporated, issued 10% bonds, dated January 1, with a face amount of $160 million. The bonds were priced at $142.00 million (plus accrued interest) to yield 12%. The price if issued on January 1 would have been $139.25 million. Interest is paid semiannually on June 30 and December 31. Baddour’s fiscal year ends September 30. Required: 1. to 3. What would be the amount(s) related to the bonds Baddour would report in its balance sheet, income statement and statement of cash flows for the year ended September 30, 2024?
On January 1, 2021, Ithaca Corp. purchases Cortland Inc. bonds that have a face value of $210,000. The Cortland bonds have a stated interest rate of 10%. Interest is paid semiannually on June 30 and December 31, and the bonds mature in 10 years. For bonds of similar risk and maturity, the market yield on particular dates is as follows: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.): January 1, 2021 11.0 % June 30, 2021 12.0 % Required:1. Calculate the price Ithaca would have paid for the Cortland bonds on January 1, 2021 (ignoring brokerage fees), and prepare a journal entry to record the purchase.2. Prepare all appropriate journal entries related to the bond investment during 2021, assuming Ithaca accounts for the bonds as a held-to-maturity investment. Ithaca calculates interest revenue at the effective interest rate as of the date it purchased the bonds.3. Prepare all appropriate…
B. On 1 July 2021, Zackry Berhad issued 8 percent bonds of nominal value RM24,000,000 at a discount of 10 percent. Transaction cost incurred amounted RM120,000. The effective rate is 5 percent and interest date is 30 June every year. The market price of bonds in year 2021 and 2022 are shown below: 30 June 2021 30 June 2022 The liability is measured at fair value. Required: Prepare the journal entries for the issuance bonds and payment of interest for the year ended 30 June 2021 and 30 June 2022. RM23,400,000 RM24,800,000
Grocery Corporation received $322, 294 for 9.00 percent bonds issued on January 1, 2021, at a market interest rate of 6.00 percent. The bonds had a total face value of $264,000, stated that interest would be paid each December 31, and stated that they mature in 10 years. Assume Grocery Corporation uses the straight-line method to amortize the bond premium. Required: 1. & 2. Prepare the required journal entries to record the bond issuance and the first interest payment on December 31. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Round your answers to the nearest whole dollar.)
Lemon Inc. had an outstanding 7%, 10-year bond payable with face amount of P5,000,000. The bond was originally sold to yield 6% annual interest. The entity used the effective interest method to amortize bond premium. On January 1, 2019, the carrying amount of the bond payable was P5,250,000. What is the premium amortization for 2019? A. 10,000B. 25,000C. P35,000D. 15,000
Moon Corporation acquired bonds with a face value of P3,000,000 for P2,800,000 on January 1, 2020. The bond has a stated interest of 10%, pays interest every December 31, and matures on December 31, 2022. Requirements: Prepare the necessary journal entries to record the above How much is the investment in bonds on December 31, 2020? Assuming that the bond is a serial bond and the P1,000,000 matures every December 31. Prepare the journal entries to record the The same information in No. 3, how much is the investment in bonds on December 31, 2020?