On January 1, 2019, Lasagna Company purchased 3,000, P1,000 face value term bonds with a stated rate of 10% as at amortized cost. The bonds pay interest annually on December 31 and will be redeemed entirely by the issuer on December 31, 2022. The bond investment was purchased for P2,819,100 at an effective rate of 12%. On January 1, 2020, the entity changed business model for managing its financial assets and this investment was reclassified as debt investments at fair value through profit or loss. On this date, the bonds are quoted at 101. 1.1 What is the amount taken to profit or loss as a result of the reclassification? A. P129,721 B. P172,608 C. P30,000 D. P109,721 1.2 What is the amount at which the debt investments at fair value through profit or loss shall be recorded upon reclassification? (no need solution) A. at market value of P3,030,000 and the difference between market value and amortized cost is taken to equity B . at market value of P3,030,000 and the difference between market value and amortized cost is taken to profit or loss C. at amortized cost D. at face value E. None of the above
On January 1, 2019, Lasagna Company purchased 3,000, P1,000 face
amortized cost. The bonds pay interest annually on December 31 and will be redeemed entirely by the issuer on December 31, 2022. The bond investment was purchased for P2,819,100 at an effective rate of 12%.
On January 1, 2020, the entity changed business model for managing its financial assets and this investment was
reclassified as debt investments at fair value through profit or loss. On this date, the bonds are quoted at 101.
1.1 What is the amount taken to profit or loss as a result of the reclassification?
A. P129,721
B. P172,608
C. P30,000
D. P109,721
1.2 What is the amount at which the debt investments at fair value through profit or loss shall be recorded upon
reclassification? (no need solution)
A. at market value of P3,030,000 and the difference between market value and amortized cost is taken to equity
B . at market value of P3,030,000 and the difference between market value and amortized cost is taken to profit
or loss
C. at amortized cost
D. at face value
E. None of the above
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