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: Investment in Bonds P101,258 Investment in Stocks 62,400 Total P163,658 Journal Entries: 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 Investment in BSP bonds 105, 242 Cash 105, 242 To record the acquisition of P100,000 face value BSP bonds December 31, 2020 Unrealized Gain / (Loss) on market changes 2,242 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, 2021 Cash 5,000 Interest revenue 5,000 To record interest for 6 months December 31, 2021 Unrealized Gain / (Loss) on market changes 1,742 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: Year Cost Market Value Unrealized Gain / (Loss) 2020 105,242 103,000 (2,242) 2021 105,242 103,500 (1,742) 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).
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
Investment in Bonds P101,258
Investment in Stocks 62,400
Total P163,658
Journal Entries:
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
|
Date |
Account |
Debit |
Credit |
|
July 1, 2020 |
Investment in BSP bonds |
105, 242 |
|
|
Cash |
105, 242 |
||
|
To record the acquisition of P100,000 face |
|||
|
December 31, 2020 |
Unrealized Gain / (Loss) on market changes |
2,242 |
|
|
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, 2021 |
Cash |
5,000 |
|
|
Interest revenue |
5,000 |
||
|
To record interest for 6 months |
|||
|
|
|||
|
December 31, 2021 |
Unrealized Gain / (Loss) on market changes |
1,742 |
|
|
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:
|
Year |
Cost |
Market Value |
Unrealized Gain / (Loss) |
|
2020 |
105,242 |
103,000 |
(2,242) |
|
2021 |
105,242 |
103,500 |
(1,742) |
How much is the retroactive adjustment to the beginning balance of
Step by step
Solved in 2 steps
