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)

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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?

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: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)
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
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
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