19. On January 1, 2023, Peace & Calm Corporation purchased P4,000,000 8% bonds for P3,870,304. Peace & Calm records the financial asset at fair value through other comprehensive income. However, if market interest rates fall sufficiently, Peace & Calm will consider selling the investment in bonds to realize associated gain. The bonds were purchased to yield 9%. Interest is payable annually every December 31. The bonds mature on December 31, 2026. On December 31, 2023, the bonds were selling at 102. On December 31, 2024, Peace & Calm sold 25% of the bonds at 104, which is the fair value of the bonds on that date, plus accrued interest. How much is the unrealized gain to be recognized as component of equity on December 31, 2023? a. 289,696 b. 238,023 C. 209,696 181,369

19. On January 1, 2023, Peace & Calm Corporation purchased P4,000,000 8% bonds for P3,870,304. Peace & Calm records the financial asset at fair value through other comprehensive income. However, if market interest rates fall sufficiently, Peace & Calm will consider selling the investment in bonds to realize associated gain. The bonds were purchased to yield 9%. Interest is payable annually every December 31. The bonds mature on December 31, 2026. On December 31, 2023, the bonds were selling at 102. On December 31, 2024, Peace & Calm sold 25% of the bonds at 104, which is the fair value of the bonds on that date, plus accrued interest. How much is the unrealized gain to be recognized as component of equity on December 31, 2023? a. 289,696 b. 238,023 C. 209,696 181,369

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 1RE

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On January 1, 2018, Wawatosa Inc. issued 5-year bonds with a face value of $200,000 and a stated interest rate of 12% payable semi-annually on July 1 and January 1. The bonds were sold to yield 10%. Assuming the bonds were sold at 107.732, what is the selling price of the bonds? Were they issued at a discount or a premium?
62. On January 1, 2021, M&M company purchased P1,000,000, 12% bonds for P1,065,000, a price that yields 10%. The bonds pay interest semi-annually every January 1and July 1. On December 31, 2021, each bond is selling at P1,055. If the debt investments are classified as at amortized cost, what is the carrying value of the debt investment reported at December 31, 2021? A.P1,051,163B.P1,000,000C.P1,065,000D.P1,055,000
35. On January 1, 2020, Knit Company purchased 8% bonds in the face amount of P8,000,000. The bonds mature on January 1, 2025 and were purchased for P8,671,680 to yield 6%. Knit’s business model for this investment is to collect contractual cash flows composed of principal and interest, and sell the asset in the open market. Interest is payable annually every December 31. The fair value of the bonds on December 31, 2020 was P7,737,600 with an effective yield of 9%. What is the interest income for 2020?
35. On January 1, 2020, Knit Company purchased 8% bonds in the face amount of P8,000,000. The bonds mature on January 1, 2025 and were purchased for P8,671,680 to yield 6%. Knit’s business model for this investment is to collect contractual cash flows composed of principal and interest, and sell the asset in the open market. Interest is payable annually every December 31. The fair value of the bonds on December 31, 2020 was P7,737,600 with an effective yield of 9%. What is the interest income for 2020? a. 780,451 b. 513,119 c. 640,000 d. 520,301
On January 1, 2021, Blue company purchased P1,000,000, 12% bonds for P1,065,000, a price that yields 10%. The bonds pay interest semi-annually every January 1and July 1. At December 31, 2021, each bonds is selling at P1,075. The debt investment is classified as at FVPL. What was the carrying value of the debt investment at December 31, 2021?
Ma4. On June 30, 2022 Maxim Corp purchased 7%, $100,000 10 year bonds. Interest is paid annually on Dec 31. Maxim uses the amortized cost model and the effective interest method for amortizing any premium or discount. The current market rate was 8% and as a result Maxim paid $93,290 for the bonds. On December 31, 2022 the bonds have a market value of $90,000. The bonds had a market value of $93,000 on December 31, 2023. Assuming the company uses amortized cost to account for the investment, record the purchase of the bonds and the entries for 2022.
30. On January 1, 2023, AAA Company issued as amortized cost P5,000,000 face value,8% bonds for P4,562,000. The bonds were issued to yield 10%. The bonds mature on January 1, 2028 and pay interest annually on December 31. AAA uses the interest method of amortization. What is the carrying amount of the bonds payable on December 31, 2024?
On January 1, 2021, Mega Corporation purchased P1,000,000, 12% bonds for P1,065,000, a price that yields 10%. the bonds pay interest semi-annually every January 1 and July 1 and they mature on January 1, 2025. Mega designates this debt investment at fair value through profit or loss. At December 31, 2021, each P1,000 bond is selling at 105.5. What is the carrying value of the debt investment at December 31, 2021? a.) P1,065,000 b.) P1,055,000 c.) P1,051,163 d.) P1,000,000
Please include solutions! On June 1, 2019, YODA CORP. acquired a 5-year, 10%, P1,000,000 face value bonds at 92. The company paid broker's fees and non-refundable taxes amounting to P118,896. As a result, yield rate on the bond was 9%. Interests are collectible annually every May 31. The bonds were selling at 120, 105, 98 as of December 31, 2019, December 31, 2020 and December 31, 2021; respectively. On September 30, 2021, YODA sold P250,000 face value bonds for a total cost of P280,000. Answer the following questions assuming the company classified the investment as financial assets at amortized cost: How much is the interest income for the year ended December 31, 2019? a. 58,333 c. 93,501 b. 54,542 d. 48,300 Answer given: Letter B. (please show solutions) 12. How much should be the 2021 gain or loss on the sale of the investment? a. 15,982 c. 9,018 b. 24,315 d. 685 Answer given: Letter A (please show solutions)
Please include solutions! On June 1, 2019, YODA CORP. acquired a 5-year, 10%, P1,000,000 face value bonds at 92. The company paid broker's fees and non-refundable taxes amounting to P118,896. As a result, yield rate on the bond was 9%. Interests are collectible annually every May 31. The bonds were selling at 120, 105, 98 as of December 31, 2019, December 31, 2020 and December 31, 2021; respectively. On September 30, 2021, YODA sold P250,000 face value bonds for a total cost of P280,000. Answer the following questions assuming the company classified the investment as financial assets at amortized cost: How much should be the 2021 gain or loss on the sale of the investment? a. 15,982 c. 9,018 b. 24,315 d. 685 Answer given: Letter A (please show solutions)
24. On January 1, 2020, Ebasan Company purchased P4,000,000 10 % bonds for P3,711,520. These bonds are held in a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets. The bonds were purchased to yield 12%. Interest is payable annually every December 31. The bands mature on December 31, 2024. On December 31, 2020 the bonds were selling at 99. On December 31, 2020, Ebasan sold P2,000,000 face value bands at 101, which is the fair value of the bonds on that date, plus accrued interest. The unrealized gain to be recognized as a separate component of equity on December 31, 2020 is A. 203,098 B. 248,480 C. 152,270 D. 141,549
On January 1, 2018, HI company purchased P1,000,000, 12% bonds for P1,063,394, a price that yields 10%. Interest on these bonds is payable every December 31. On April 1, 2020, HI sold P600,000 face value bonds at 101 plus accrued interest. The debt investment is designated as at FVPL. The market value of the bonds were: Dec. 31, 2018-P108; Dec.31, 2019 - P106; Dec. 31, 2020 –P104. What is the amount of gain or loss on the sale of bonds on April 1, 2020?