Problem 21-5 (IFRS - From FVOCI to FVPL) On January 1, 2022, Zeta Company purchased 8% bonds with face amount of P4,000,000. The bonds mature on January 1, 2027 and were purchased for P4,335,000 to yield 6%. Interest is payable annually every December 31. The business model for this investment is to collect contractual cash flows composed of principal and interest and to sell the asset in the open market. December 31, 2022 December 31, 2023 Fair value 3,870,000 3,615,000 Effective rate 9% 12% On December 31, 2022, the entity changed the business model for this investment to realize fair value changes. On January 1, 2023, the fair value of the bonds did not change.
Problem 21-5 (IFRS - From FVOCI to FVPL) On January 1, 2022, Zeta Company purchased 8% bonds with face amount of P4,000,000. The bonds mature on January 1, 2027 and were purchased for P4,335,000 to yield 6%. Interest is payable annually every December 31. The business model for this investment is to collect contractual cash flows composed of principal and interest and to sell the asset in the open market. December 31, 2022 December 31, 2023 Fair value 3,870,000 3,615,000 Effective rate 9% 12% On December 31, 2022, the entity changed the business model for this investment to realize fair value changes. On January 1, 2023, the fair value of the bonds did not change.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Problem 21-5 (IFRS- From FVOCI to FVPL)
On January 1, 2022, Zeta Company purchased 8% bonds with
face amount of P4,000,000.
The bonds mature on January 1, 2027 and were purchased
for P4,335,000 to yield 6%. Interest is payable annually every
December 31.
The business model for this investment is to collect contractual
cash flows composed of principal and interest and to sell the
asset in the open market.
December 31, 2022
December 31, 2023
Fair value
3,870,000
3,615,000
Effective rate
9%
12%
On December 31, 2022, the entity changed the business model
for this investment to realize fair value changes.
On January 1, 2023, the fair value of the bonds did not change.
Required:
1. What amount should be reported as interest income for
2022?
2. What amount of unrealized loss should be recognized in
other comprehensive income for 2022?
3. What amount should be reported as interest income for
2023?
4. What total amount is included in profit or loss in 2023 as
a result of the reclassification?
5. Prepare journal entries for 2022 and 2023.
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