PROBLEM 8On January 2, 2021, Santos Company invested in a 4 -year, 10% bond with facevalue of P6,000,000 in which interest is to be paid every December 31. The bond hasan effective interest rate of 9% and was acquired at prevailing rate of interest. OnDecember 31, 2021, the bond has fair value of P6,229,862, which is based onprevailing rate of interest of 8.5%.Assume that on the date of acquisition the debt investment was designated asinvestment at FVTOCI but reclassified on January 1, 2022 due to changes inbusiness model as investment at amortized cost, at what amount should theinvestment account be reported in December 31, 2022 financial statement?

Financial statements refer to the written form of a statement of a company that depicts its…

On January 2, 2021, Santos Company invested in a 4-year, 10% bond with face value of P6,000,000 in which interest is to be paid every December 31. The bond has an effective interest rate of 9% and was acquired at prevailing rate of interest. On December 31, 2021, the bond has fair value of P6,229,862, which is based on prevailing rate of interest of 8.5%.

On January 2, 2021, Santos Company invested in a 4-year, 10% bond with face value of P6,000,000 in which interest is to be paid every December 31. The bond has an effective interest rate of 9% and was acquired at prevailing rate of interest. On December 31, 2021, the bond has fair value of P6,229,862, which is based on prevailing rate of interest of 8.5%.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

On Jan. 1, 2021, ABC purchased bonds for the purpose of both collecting the contractual cash flows and selling the investment. The bonds have a total face value of P6,000,000, an interest rate of 8% payable every August 1, and a remaining term of 4 years and 7 months. It paid P6,145,000 inclusive of accrued interest and a transaction fee of P50,000. As of the end of the year, the bonds have a fair value of P5,960,000. What is the compound journal entry to update the carrying value of the investment and the balances of the related accounts on Dec. 31, 2021? In the google form, provide the interest income to be recorded on that same day.
On January 1, 2023, Marigold Corporation purchased a newly issued $1,250,000 bond. The bond matured on December 31, 2025, and paid interest at 6% every June 30 and December 31. The market interest rate was 8%. Marigold's fiscal year-end is October 31, and the company had the intention and ability to hold the bond until its maturity date. The bond will be accounted using the amortized cost model. Click here to view Table A.2-PRESENT VALUE OF 1-(PRESENT VALUE OF A SINGLE SUM) Click here to view Table A.4-PRESENT VALUE OF AN ORDINARY ANNUITY OF 1 (a) Calculate the price paid for the bond using a financial calculator or Excel functions. (Round answers to 2 decimal places, eg. 52.75.) PV S
On January 1, 2019, Caldereta Company purchased bonds with a face value of P3,000,000 for P3,108,000 to yield 12%. The bonds are due on December 31, 2023 and carry a 13% interest rate. Interest is receivable annually on December 31. The bonds were initially recorded at amortized cost. On June 30, 2020, one-half of the bonds were sold for P1,595,000 plus accrued interest. After the disposal, the company changed its business model for managing its financial assets and is now actively trading its portfolio. At December 31, 2020, the bonds were quoted at 101. What is the gain on the sale of the bond investment?A. P95,000B. P54,291C. P49,250D. P41,000
n January 1, 2021, MACADAMIA Company issued 5 year bonds with face value of ₱5,000,000 at 110. The company paid bond issued cost of ₱80,000 on same date. The stated interest rate on the bonds is 8% payable annually every December 31. After consideration of bond issue costs to be initially measured, the bonds were determined to yield 6% per annum. On December 31, 2021, what should MACADAMIA report as carrying amount of the bonds payable? * A ₱ 5,000,000 B ₱ 5,414,800 C ₱ 5,430,800 D ₱ 5,345,200
On January 1, 2020, XYZ Co. issued a bond with a $400,000 par (face) value. The bond is a 5-year bond and will mature on December 31, 2025. The bond has a contract rate of interest of 5% and interest is paid semi-annually on June 30 and December 31 of each year. On January 1, 2020, the market rate of interest for bonds was 6%. The issue price of the bond was $382,942. The journal entry to record issuance of the bond would be: Debit Credit Cash $382,942 Discount on B/P 17,058 Bonds Payable $400,000 prepare the journal entry to record the first interest payment on XYZ Co.'s bond on June 30, 2020 using the straight-line method. (Show your work in each step using the recommended approach.)
On January 1, 2023, Toyota Corporation purchased a newly issued $1,025,000 bond. The bond matured on December 31, 2025, and paid interest at 6% every June 30 and December 31. The market interest rate was 8%. Toyota's fiscal year-end is October 31, and the company had the intention and ability to hold the bond until its maturity date. The bond will be accounted using the amortized cost model.Click here to view Table A.2 - PRESENT VALUE OF 1 - (PRESENT VALUE OF A SINGLE SUM)Click here to view Table A.4 - PRESENT VALUE OF AN ORDINARY ANNUITY OF 1 (a) Calculate the price paid for the bond using a financial calculator or Excel functions. (Round answers to 2 decimal places, e.g. 52.75.) b) Prepare an amortization schedule for the bond. (Round answers to 2 decimal places, e.g. 52.75.) c). Prepare the journal entries on the books of Toyota Corporation for each of the following dates. (Round answers to 2 decimal places, e.g. 52.75. Credit account titles are automatically indented when the…
On January 1, 2023, Teal Corporation purchased a newly issued $1,425,000 bond. The bond matured on December 31, 2025, and paid interest at 6% every June 30 and December 31. The market interest rate was 8%. Teal's fiscal year-end is October 31, and the company had the intention and ability to hold the bond until its maturity date. The bond will be accounted using the amortized cost model. Click here to view Table A.2 - PRESENT VALUE OF 1- (PRESENT VALUE OF A SINGLE SUM) Click here to view Table A.4 - PRESENT VALUE OF AN ORDINARY ANNUITY OF 1 (a) X Your answer is incorrect. Calculate the price paid for the bond using a financial calculator or Excel functions. (Round answers to 2 decimal places, e.g. 52.75.) PV $ -1062917.95 4
On March 1, 2024, Baddour, Incorporated, issued 10% bonds, dated January 1, with a face amount of $160 million. The bonds were priced at $142.00 million (plus accrued interest) to yield 12%. The price if issued on January 1 would have been $139.25 million. Interest is paid semiannually on June 30 and December 31. Baddour’s fiscal year ends September 30. Required: 1. to 3. What would be the amount(s) related to the bonds Baddour would report in its balance sheet, income statement and statement of cash flows for the year ended September 30, 2024?
On January 1, 2021, Ithaca Corp. purchases Cortland Inc. bonds that have a face value of $210,000. The Cortland bonds have a stated interest rate of 10%. Interest is paid semiannually on June 30 and December 31, and the bonds mature in 10 years. For bonds of similar risk and maturity, the market yield on particular dates is as follows: (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.): January 1, 2021 11.0 % June 30, 2021 12.0 % Required:1. Calculate the price Ithaca would have paid for the Cortland bonds on January 1, 2021 (ignoring brokerage fees), and prepare a journal entry to record the purchase.2. Prepare all appropriate journal entries related to the bond investment during 2021, assuming Ithaca accounts for the bonds as a held-to-maturity investment. Ithaca calculates interest revenue at the effective interest rate as of the date it purchased the bonds.3. Prepare all appropriate…
B. On 1 July 2021, Zackry Berhad issued 8 percent bonds of nominal value RM24,000,000 at a discount of 10 percent. Transaction cost incurred amounted RM120,000. The effective rate is 5 percent and interest date is 30 June every year. The market price of bonds in year 2021 and 2022 are shown below: 30 June 2021 30 June 2022 The liability is measured at fair value. Required: Prepare the journal entries for the issuance bonds and payment of interest for the year ended 30 June 2021 and 30 June 2022. RM23,400,000 RM24,800,000