60.1K

Verified Solution

Link Copied!

RECLASSIFICATION OF FINANCIAL ASSET Problem 9 On January 1, 2018, Complex Company purchased bonds with face amount of P5,000,000. The entity paid P4,500,000 plus transaction cost of P168,600. The bonds mature on December 31, 2021 and pay 6% interest annually on December 31 of each year with 8% effective yield. The bonds are quoted at 105 on December 31, 2018 and 110 on December 31, 2019. The business model in managing the financial asset is to collect contractual cash flows and also to sell the bonds in the open market The entity has not elected the fair value option. On December 31, 2019, the entity changed the business model to collect only contractual cash flows. On December 31, 2020, the bonds are quoted at 115 and the market rate of interest is 10%. 1. What amount of unrealized gain should be reported as component of OCI for 2018? a. 250,000 b. 690,000 C. 507,912 d. 0 2. What amount of cumulative unrealized gain should be reported as component of OCI in the statement of changes in equity for 20197 a. 500,000 b. 678,545 c. 250,000 d. 875,200 3. What amount of unrealized gain should be reported as component of OCI for 2019? a. 500,000 b. 250,000 C. 170,633 d. 185,200 4. What is the interest income for 2020? a. 300,000 b. 500,000 C. 385,716 d. 369,984 5. What is the carrying amount of the investment on December 31, 2020? a. 4,694,784 b. 4,668,600 C. 4,907,171 d. 5,750,000

Answer & Explanation Solved by verified expert

See Answer