Pedro Co purchased a bond investment in Juan Company. The following are the data pertaining to Pedro's Investments in Debt Security. Date of purchase: Purchase price: Principal amount: Cash interest: Effective interest: Maturity date: Fair value of the bond: December 31, 2021 at 3% rate December 31, 2022 at 3.5% rate December 31, 2023 at 4% rate December 31, 2024 at 4.5% rate January 1, 2021 P4,200,000 P4,000,000 5% per annum, payable on December 31 3.8806% per annum December 31, 2025 P4,297,368 P4,168,098 P4,075,444 P4,019,139 If initially the investment is accounted for as Amortized Cost for two years and then shifted it to Trading Security, what is the adjustment to Income at reclassification date?

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Pedro Co purchased a bond investment in Juan
Company. The following are the data pertaining to
Pedro's Investments in Debt Security.
Date of purchase:
January 1, 2021
Purchase price:
P4,200,000
Principal amount:
P4,000,000
Cash interest:
5% per annum, payable on December 31
Effective interest:
3.8806% per annum
Maturity date:
December 31, 2025
Fair value of the bond:
December 31, 2021 at 3% rate
P4,297,368
December 31, 2022 at 3.5% rate
P4,168,098
December 31, 2023 at 4% rate
P4,075,444
December 31, 2024 at 4.5% rate
P4,019,139
If initially the investment is accounted for as Amortized
Cost for two years and then shifted it to Trading Security,
what is the adjustment to Income at reclassification date?
Transcribed Image Text:Pedro Co purchased a bond investment in Juan Company. The following are the data pertaining to Pedro's Investments in Debt Security. Date of purchase: January 1, 2021 Purchase price: P4,200,000 Principal amount: P4,000,000 Cash interest: 5% per annum, payable on December 31 Effective interest: 3.8806% per annum Maturity date: December 31, 2025 Fair value of the bond: December 31, 2021 at 3% rate P4,297,368 December 31, 2022 at 3.5% rate P4,168,098 December 31, 2023 at 4% rate P4,075,444 December 31, 2024 at 4.5% rate P4,019,139 If initially the investment is accounted for as Amortized Cost for two years and then shifted it to Trading Security, what is the adjustment to Income at reclassification date?
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