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, 2021Purchase price:P4,200,000Principal amount:P4,000,000Cash interest:5% per annum, payable on December 31Effective interest:3.8806% per annumMaturity date:December 31, 2025Fair value of the bond: December 31, 2021P4,894,000 December 31, 2022P4,560,000The bond was sold on December 31, 2022 at its fair value. If the bonds are held for trading, the amount of income (loss) recognized in Profit or Loss in 2022?

Trading securities are financial assets that are held by a company to generate profits by selling…

Answered: Pedro Co purchased a bond investment in…

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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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	P4,894,000
December 31, 2022	P4,560,000
The bond was sold on December 31, 2022 at its fair value.

If the bonds are held for trading, the amount of income (loss) recognized in Profit or Loss in 2022?

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