Quail Company had an investment in bonds purchased at par for P8,000,000. On December 31, 2018, the remaining life of the bonds is 3 years with an annual interest payment at 10% payable at the end of each year. The issuer was facing a tough economi environment and informed all of the investors that it will be unable to make all payments according to the contractual terms. The entity had projected the expected cash flow for this investment to be P1,000,000 or December 31, 2019, P2,000,000 on December 31, 2020 and P6,000,000 on December 31, 2021. The market rate of interest is 12% for 2018. In connection with your audit, how much is the interest income for the year ended December 31, 2019?

Quail Company had an investment in bonds purchased at par for P8,000,000. On December 31, 2018, the remaining life of the bonds is 3 years with an annual interest payment at 10% payable at the end of each year. The issuer was facing a tough economi environment and informed all of the investors that it will be unable to make all payments according to the contractual terms. The entity had projected the expected cash flow for this investment to be P1,000,000 or December 31, 2019, P2,000,000 on December 31, 2020 and P6,000,000 on December 31, 2021. The market rate of interest is 12% for 2018. In connection with your audit, how much is the interest income for the year ended December 31, 2019?

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

ChapterA2: Investments

Section: Chapter Questions

Problem 7MCQ

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