On July 1, Year 2, MODESTA Company purchased P10 million of West Company’s 8% bonds due on July 1, Year 10. Based on the company’s business model for the portfolio of investments, MODESTA designates the bonds as investments measured at amortized cost. The bonds, which pay interest semiannually on January 1 and July 1 were purchased for P8,750,000 to yield 10%. In its statement of comprehensive income for the year ended December 31, Year 2, MODESTA Company should report interest income of a. P437,500 b. P350,000 c. P500,000 d. P400,000
On July 1, Year 2, MODESTA Company purchased P10 million of West Company’s 8% bonds due on July 1, Year 10. Based on the company’s business model for the portfolio of investments, MODESTA designates the bonds as investments measured at amortized cost. The bonds, which pay interest semiannually on January 1 and July 1 were purchased for P8,750,000 to yield 10%. In its statement of comprehensive income for the year ended December 31, Year 2, MODESTA Company should report interest income of a. P437,500 b. P350,000 c. P500,000 d. P400,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On July 1, Year 2, MODESTA Company purchased P10 million of West Company’s 8% bonds due on July 1, Year 10. Based on the company’s business model for the portfolio of investments, MODESTA designates the bonds as investments measured at amortized cost. The bonds, which pay interest semiannually on January 1 and July 1 were purchased for P8,750,000 to yield 10%.
In its statement of comprehensive income for the year ended December 31, Year 2, MODESTA Company should report interest income of
a. P437,500
b. P350,000
c. P500,000
d. P400,000
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