On January 1, 2019, Gurl Company purchased as a long term investment P5,000,000 face amount of Lulu Company’s 8% bonds for P4,562,000. The bonds were purchased to yield 10% interest. The Bonds mature on January 1, 2024 and pay interest annually on December 31. The interest method of amortization is used. What amount should be reported as interest income for year 2020? What is the carrying amount of the bond investment on December 31, 2020?

On January 1, 2019, Gurl Company purchased as a long term investment P5,000,000 face amount of Lulu Company’s 8% bonds for P4,562,000. The bonds were purchased to yield 10% interest. The Bonds mature on January 1, 2024 and pay interest annually on December 31. The interest method of amortization is used. What amount should be reported as interest income for year 2020? What is the carrying amount of the bond investment on December 31, 2020?

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 1MC

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