The Polythene Pam Company purchases P2,000,000 of bonds. The asset has been designated as one at fair value through profit and loss.One year later, 10% of the bonds are sold for P400,000. Total cumulative gains previously recognized in Polythene Pam's financialstatements in respect of the asset are P100,000.What is the amount of the gain on disposal to be recognized in profit or loss?P200,000O P190,000O P90,000P100,000

Solution: Cost of investment sold = Total cost * 10% = 2000000*10% = P200,000

Answered: The Polythene Pam Company purchases…

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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Avatar Ltd (Avatar) purchased $55,000 of bonds at par. The bonds has been classified as one to be held at fair value through other comprehensive income. At the maturity date, the principal of bonds is redeemed at par when the carrying amount of the bonds is $54,200. Total cumulative losses previously recognized in Avatar’s other comprehensive income in respect of the bonds are $800 before derecognition. Required: In accordance with HKFRS 9 ‘Financial Instruments’, what is the net effect of the disposal of the bonds to be recognized in profit or loss and balance of fair value reserve after derecognition? A. Profit or loss: $0; Fair value reserve: ($1,600) B. Profit or loss: $800 loss; Fair value reserve: $0 C. Profit or loss: $0; Fair value reserve: $0 D. Profit or loss: $800 gain; Fair value reserve: $0
On July 1, Year 1, XYZ Corporation purchased as a long-term investment a $2 million face amountABC Co. 6% bond for $2,025,000 plus accrued interest to yield 5.75%. On December 31, Year 1,the bonds had a fair value of $1,850,000. What amount of income should XYZ report on its incomestatement for the year ended December 31, Year 1, related to this bond investment if it is classifiedas a held-to-maturity security?a. $120,000b. $116,438c. $121,500d. $115,000
On January 1, 2025, Sunland Company makes the two following acquisitions. 1. Purchases land having a fair market value of $860,000 by issuing a 5-year, zero-interest-bearing promissory note in the face amount of $1,263,622. 2. Purchases equipment by issuing a 5%, 9-year promissory note having a maturity value of $350,000 (Interest payable annually on January 1). The company has to pay 9% interest for funds from its bank. (a) Record the two journal entries that should be recorded by Sarasota Company for the two purchases on January 1, 2025. (b) Record the interest at the end of the first year on both notes using the effective-interest method.
Ruben Company purchased $100,000 of Evans Company bonds at 100. Ruben later sold the bonds for $104,500 plus $500 in accrued interest. The journal entry for the sale of the bonds would be debit Cash, $104,500, and Interest Receivable, $500; credit Investments-Evans Company Bonds, $100,000, Gain on Sale of Investments, $4,500, and Interest Revenue, $500 Odebit Cash, $105,000; credit Investments Evans Company Bonds, $100,000, Gain on Sale of Investments, $4,500, and Interest Revenue, $500 debit Cash, $105,000; credit Investments-Evans Company Bonds, $100,000, and Gain on Sale of Investments, $5,000 debit Cash, $105,000; credit Investments-Evans Company Bonds, $104,500, and Interest Revenue, $500

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