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Finals - Assignment 4 PDF

The document provides information about several bond investments, including face values, purchase prices, yields, and dates of interest payments. It includes 12 multiple choice questions testing the calculation of interest income and carrying amounts of the bond investments for various years under different scenarios, such as purchased at a premium or discount, changes in business models, and fair value elections.

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charlies parreno
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3K views2 pages

Finals - Assignment 4 PDF

The document provides information about several bond investments, including face values, purchase prices, yields, and dates of interest payments. It includes 12 multiple choice questions testing the calculation of interest income and carrying amounts of the bond investments for various years under different scenarios, such as purchased at a premium or discount, changes in business models, and fair value elections.

Uploaded by

charlies parreno
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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BOND INVESTMENT

Use the following information for the next two (2) questions:

On January 1, 20x20, an entity purchased as a long-term investment P5,000,000 face value 8% bonds for
P4,530,000. The bonds were purchased to yield 10% interest. The bonds pay interest annually on December 31.
The effective interest method of amortization is used.

1. What is the interest income for 20x21?


A. P500,000 B. P400,000 C. P453,000 D.
P458,300

2. What is the carrying amount of the investment in bonds on December 31, 20x21?
A. P5,000,000 B. P4,583,000 C. P4,477,000 D.
P4,641,300

Use the following information for the next two (2) questions:

On January 1, 20x20, an entity paid P5,990,000 for a 10% bond with face amount of P5,000,000. Interest is payable
semiannually on June 30 and December 31. The bond was purchased to yield 8%. The effective interest method is
used.

3. What is the interest income for 20x20?


A. P479,200 B. P239,600 C. P500,000 D.
P478,784

4. What is the carrying amount of the bond investment on December 31, 20x20?
A. P5,968,784 B. P5,990,000 C. P5,979,600 D.
P5,969,200

Use the following information for the next three (3) questions:

At the beginning of current year, an entity purchased 12% bonds with face amount of P5,000,000 for P5,500,000
including transaction costs of P100,000. The bonds provide an effective yield of 10%. The bonds are dated
January 1 and pay interest annually on December 31 of each year. The bonds are quoted at 115 at year-end. The
entity has irrevocably elected to use the fair value option.

5. What is the carrying amount of the bond investment on December 31?


A. P5,750,000 B. P5,400,000 C. P5,500,000 D.
P5,450,000

6. What amount of gain from change in fair value should be reported for the current year?
A. P750,000 B. P250,000 C. P350,000 D. P0

7. What amount of interest income should be reported by the current year?


A. P600,000 B. P550,000 C. P660,000 D.
P540,000

Use the following information for the next four (4) questions:

On January 1, 20x20, an entity purchased bonds with face amount of P5,000,000. The entity paid P4,500,000 plus
transaction cost of P168,000. The bonds mature on December 31, 20x23 and pays 6% interest annually on December
31 of each year with 8% effective yield.

The bonds were quoted at 105 on December 31, 20x20 and 110 on December 31, 20x21.

The business model is managing the financial asset is to collect contractual cash flows that are solely payments of
principal and interest and also to sell the bonds in the open market.

The entity has not elected the fair value option.

On December 31, 20x21, the entity changed the business model to collect only contractual cash flows.
On December 31, 20x22, the bonds are quoted at 115 and the market interest rate is 10%.

8. What amount of unrealized gain should be reported as component of OCI in the statement of comprehensive
income for 20x20?
A. P250,000 B. P690,000 C. P507,912 D. P0

9. What amount of cumulative unrealized gain should be reported as component of OCI in the statement of
changes in equity for 20x21?
A. P500,000 B. P678,545 C. P250,000 D.
P875,200

10. What amount of unrealized gain should reported as component of OCI in the statement of comprehensive
income for 20x21?
A. P500,000 B. P250,000 C. P170,633 D.
P175,200

11. What is the interest income for 20x22?


A. P300,000 B. P500,000 C. P385,716 D.
P369,984

12. What is the carrying amount of the investment on December 31, 20x22?
A. P4,694,784 B. P4,668,600 C. P4,907,171 D.
P5,750,000

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