Under HKFRS 9 'Financial Instruments', which of the following assets should be held at fair value? 1) An investment in 1 million ordinary shares of Edward Ltd with no intention to control, significant influence or joint control 2) $3 million of 5% bonds with a term of 10 years. The company intends to sell the bonds within the next

Under HKFRS 9 'Financial Instruments', which of the following assets should be held at fair value? 1) An investment in 1 million ordinary shares of Edward Ltd with no intention to control, significant influence or joint control 2) $3 million of 5% bonds with a term of 10 years. The company intends to sell the bonds within the next

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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1. On January 1, 20X2, Tanangonan Company acquired all the assets and assumed all the liabilities of Ong Company. In exchange for the net assets of Ong, Tanangonan gave its bond payable with a maturity value of P600,000 with a stated rate of 10% interest payable semiannually on June 30 and December 31. The said bond will mature after 10 years and has a yield rate of 12%. The Statement of Financial Position (SFP) of both companies as of January 1, 20X2 were as follows: Tanangonan Book Value Ong Book Value Fair Value P250,000 352,700 Cash P114,000 150,000 232,000 100,000 410,000 (170,500) 136,450 (90,450) P881,500 P114,000 135,000 310,000 315,000 54,900 Receivables Inventories 848,300 700,000 950,000 (325,000) 262,750 (70,050) P2,968,700 Land Buildings Accumulated Depreciation – Buildings Equipment Accumulated Depreciation – Equipment Total Assets 39,450 P968,350 Current Liabilities Bond Payable Common Stock, P15 par value Common Stock, P5 par value Other Contributed Capital Retained…
Example 2) Fair value through profit or loss: Debt investment ABC Co. had the following transactions pertaining its trading investments: Feb. 1, 2021 Purchased $200,000 of 3-year, 6% bonds at 104. Interest is payable on each August 1 and February 1. Aug. 1, 2021 Received interest on the bonds. Dec. 31, 2021 The fair value of the bonds was 100. Instruction: Record the above transactions, using the fair value through profit or loss model. Also, prepare any required adjusting entry/entries at December 31, 2021. ABC Co. has a December 31 year-end.
Client 7: The following data has been provided by your client, Hye Jin Corporation for their financial assets measured at FVOCI. On January 1, 2021, Hye Jin acquired P1,000,000, 10% bonds for P951,963. The principal is due on January 1, 2024 but interest is due annually every January 1. The effective interest rate is 12%. The bonds are measured at FVOCI. Information on fair values is as follows: December 31, 2021 98 December 31, 2022 103 13. How much is the value of the bonds on December 31, 2021? 14. Interest income recognized in 2022 15. Realized gain or loss from the investment in bonds on December 31, 2021 16. On January 1, 2023, Hye Jin sold all the bonds at 104. Calculate the gain on sale from the sale of bonds on January 1, 2023.
1. Computational. On January 1, 20x1, ABC purchased bonds with face amount of P5,000,000. The entity paid P4,700,000 plus transaction cost of P42,130 for the bond investment. The business model of the entity in managing the financial asset is to collect contractual cash flows that are solely payment of principal and interest and also to sell the bonds the open market. The bonds mature on December 31, 20x3 and pays 6% interest annually on December 31 each year with 8% effective interest rate (after incorporating the transaction cost on initial recognition). The bonds are quoted at 106 and 108 on December 31, 20x1 and December 31, 20x2. The bonds are sold at 103 on July 1, 20x3, excluding accrued interest. Use 4-decimal present value factor. For the year ended December 31, 20x3, how much is the total impact to profit or loss as a result of the business model of ABC in holding this investment? (sample answer: 2,350,450.55)
I ONLY NEED ANSWER OF 16,17 &18 PLEASE KINDLY ANSWER Problem 3:On June 1, 2021, VIXEN Company received ₱1,077,200 plus accrued interest for 12% bonds with face amount of ₱1,000,000. The bonds were sold to yield 10%. Interest is payable semiannually every July 1 and December 31. The entity elected the fair value option for measuring financial liabilities. On December 31, 2020, the fair value of the bonds is at 108. The change in fair value of the bonds is attributable to market factors.Requirements:E. Prepare all necessary entries for calendar year 2021.F. Compute or provide the answers for the following:14. How much is initial valuation of the bonds?15. How much cash was received upon the sale of the bonds?16. How much is the interest expense for the year ended December 31, 2021?17. How much is the gain or loss from change in fair value of the bonds for 2021? (In the google form, if loss, put a negative sign before the numerical figure.)18. What is the carrying amount of the…
1. On January 1, 20X2, Tanangonan Company acquired all the assets and assumed all the liabilities of Ong Company. In exchange for the net assets of Ong. Tanangonan gave its bond payable with a maturity value of P600,000 with a stated rate of 10% interest payable semiannually on June 30 and December 31. The said bond will also mature on January 1, 20X2, and has a yield rate of 12%. The Statement of Financial Position (SFP) of both companies as of January 1, 20X2 were as follows: Cash Receivables Inventories Land Buildings Accumulated Depreciation – Buildings Equipment Accumulated Depreciation - Equipment Total Assets Tanangonan Book Value P250,000 352,700 848,300 700,000 950,000 (325,000) 262,750 (70,050) P2,968,700 Ong Book Value P114,000 150,000 232,000 100,000 410,000 (170,500) 136,450 (90,450) P881,500 Fair Value P114,000 135,000 310,000 315,000 54,900 39,450 P968,350 P95,300 260,000 Current Liabilities Bond Payable Common Stock, P15 par value Common Stock, P5 par value Other…
On January 1, 2021, PHILIPPINE COMPANY acquired 5-year, 15%, $8,000,000 H-bonds. The investments were acquired at aprice to yield 14%. Interest is payable annually on December 31 starting December 31, 2021. PHILIPPINES' business model isto hold the financial assets to collect contractual cash flows. QUESTION:a. Determine the initial measurement of H-bonds on January 1, 2021.b. Prepare a schedule of amortization using the effective interest method. Use the following columns:DateInterestCollectionInterestIncomeAmortizationPresent Valuec. Prepare all journal entries for 2021 and 2022 applicable to this transaction.
On January 1, 2020, Dumaguete Company purchased bonds with face amount of P4,000,000 for P4,206,000. The business model of the entity in managing the financial asset is to collect contractual cash flows that are solely payment of principal and interest and also to sell the bonds in the open market. The entity has not elected the fair value option of measuring financial asset. The bonds mature on December 31, 2022 and pay 10% interest annually on December 31 each year with 8% effective yield. The bonds are quoted at 95 on December 31, 2020 and 90 on December 31, 2021. REQUIRED: What amount of unrealized loss should be reported as component of other comprehensive income in 2020? What amount of unrealized loss should be reported as component of other comprehensive income in 2021? What amount of cumulative unrealized loss should be reported in the statement of changes in equity on December 31, 2021?
PLEASE KINDLY ANSWER Problem 3:On June 1, 2021, VIXEN Company received ₱1,077,200 plus accrued interest for 12% bonds with face amount of ₱1,000,000. The bonds were sold to yield 10%. Interest is payable semiannually every July 1 and December 31. The entity elected the fair value option for measuring financial liabilities. On December 31, 2020, the fair value of the bonds is at 108. The change in fair value of the bonds is attributable to market factors.Requirements:16. How much is the interest expense for the year ended December 31, 2021?17. How much is the gain or loss from change in fair value of the bonds for 2021? (In the google form, if loss, put a negative sign before the numerical figure.)18. What is the carrying amount of the bonds payable on December 31, 2021?
On January 1, 2018, an entity 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, 2020 and pay 6% interest annually on December 31 of each year with 8% effective yield. The bonds were 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 that are solely payments of principal and interest 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 its business model to collect only contractual cash flows. On December 31, 2020, the bonds are quoted at 115 and the market interest rate is 10%. find the following: 1. What amount of unrealized gain should be reported as component of OCI in the statement of comprehensive income for 2018? 2. What amount of unrealized gain should be reported as component of OCI in the statement of…
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Use the following information on a company's investments in debt securities to answer the following question. The company's accounting year ends December 31. Investment Date of Acquisition 9/20/23 $38,000 Colt Compan y bonds Cost Fair Value Date Sold Selling 12/31/23 Price $37,000 2/10/24 $42,000 Dana Compan y bonds 10/2/23 14,000 14,200 1/17/24 13,000 If the above investments are categorized as available-for-sale securities, what is the net effect on 2024 other comprehensive income? Select one: a. $ 800 increase b. $0 c. $3,800 increase d. $ 800 decrease