What is the initial cost of the debt investment?   2. What is the carrying amount of the debt 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
icon
Related questions
Question
100%

On December 31,2019, OP company purchased debt investment at amortized cost P3,000,000 serial bonds with a nominal interest rate of 10% and effective rate of 13%.  Bonds with a face value of P1,000,000 mature on December 31, 2020 and every December 31 thereafter.  Present value at 13% are as follows: 1 period-0.885; 2-periods-0.783; 3 periods-0.693. 

1. What is the initial cost of the debt investment?  

2. What is the carrying amount of the debt investment on December 31, 2020?  

Expert Solution
steps

Step by step

Solved in 2 steps with 2 images

Blurred answer
Knowledge Booster
Bond Amortization
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
College Accounting, Chapters 1-27
College Accounting, Chapters 1-27
Accounting
ISBN:
9781337794756
Author:
HEINTZ, James A.
Publisher:
Cengage Learning,
Cornerstones of Financial Accounting
Cornerstones of Financial Accounting
Accounting
ISBN:
9781337690881
Author:
Jay Rich, Jeff Jones
Publisher:
Cengage Learning
Principles of Accounting Volume 1
Principles of Accounting Volume 1
Accounting
ISBN:
9781947172685
Author:
OpenStax
Publisher:
OpenStax College
EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT