Question 1: The adjustment to correct the interest income for 2021 includes a debit/(credit) to the interest revenue account amounting to? (Put a negative sign if credit)
Question 1: The adjustment to correct the interest income for 2021 includes a debit/(credit) to the interest revenue account amounting to? (Put a negative sign if credit)
Question 1: The adjustment to correct the interest income for 2021 includes a debit/(credit) to the interest revenue account amounting to? (Put a negative sign if credit)
You are in charge of auditing PLM (PopoyLangMalakas) Company's investment accounts for the year ended December 31, 2021, which was incorporated last March 3, 2020. During the course of the audit, you have obtained the balances and the related journal entries of its investment related transactions and have revealed the following information:
Question 1: The adjustment to correct the interest income for 2021 includes a debit/(credit) to the interest revenue account amounting to? (Put a negative sign if credit)
Question 2: How much is the retroactive adjustment to the beginning balance of retained earnings for the year 2021, pertaining to the investment in BSP bonds? (Please indicate debit or (credit), use negative sign if credit).
Question 3: The correct amount of investment in BSP bonds that should be presented in the statement of financial position as of December 31, 2021 is?
Transcribed Image Text:2021
Interest revenue
5,000
To record interest for 6
months
December Unrealized Gain / (Loss) on
31, 2021
1,742
market changes
Investment in BSP bonds
1,742
To record the market value
adjustment for 2021
Audit Notes:
• The market rate for similar bonds at date of acquisition is 8%.
• The bonds will mature on July 1, 2023.
• The journal entries pertaining to the market value adjustments was prepared by
the accountant in accordance with the following information:
Market
Unrealized
Year
Cost
Value
Gain / (Loss)
2020
105,242
103,000
(2,242)
2021
105,242
103,500
(1,742)
To be continued...
Question 1: The adjustment to correct the interest income for 2021 includes a
debit/(credit) to the interest revenue account amounting to? (Put a negative
sign if credit)
Transcribed Image Text:3, 2020. During the course of the audit, you have obtained the balances and the
related journal entries of its investment related transactions and have revealed the
following information:
Investment in Bonds
P101,258
Investment in Stocks
62.400
Total
P163,658
Journal Entrles:
Investment in bonds - 10% treasury bonds from the Banko Sentral ng Pilipinas. The
investment is in a portfolio which has the objective of collecting contractual cash
flows.
Date
Account
Debit Credit
July 1,
2020
105,
Investment in BSP bonds
242
105,
Cash
242
To record the acquisition of
P100,000 face value BSP
bonds
December Unrealized Gain / (Loss) on
2,242
31, 2020
market changes
Investment in BSP bonds
2,242
To record the market value
adjustment for 2020
January 1,
2021
Cash
5,000
Interest revenue
5,000
To record interest for 6
months
July 1.
Cash
5.000
Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
