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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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Lydio Company purchased P4,000,000 face value, 10%, 3-year Milo Co. bonds on January 1, 2021 whenthe prevailing market rate of interest was at 12%. Interests are collectible every December 31. Three-fourths of the Milo Co. bonds were sold on July 31, 2022 at total proceeds of P3,500,000. Yield rate at December 31, 2021 and 2022, respectively were 8% and 14%. Assuming that the company’s business model has an objective of holding the debt securities to collect contractual cash flows, what is the realizedgain on sale of Milo Co. bonds?

QUESTION 1. Assuming that the company’s business model has an objective of holding the debt securities to collect contractual cash flows and to sell, how much is the interest income in its statement of comprehensive income for the period ending December 31, 2022?

QUESTION 2. Assuming that the company’s business model has no objective of holding the debt securities to collect contractual cash flows, the investment is reported in the statement of financial position as of December 31,2022 at?

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