What is the interest income on the bond investment for the year 2022? What is the carrying amount of the bond investment on December 31, 2022? Situation 1 An entity included the following investments at cost and fair value:CostFair value – 12/31/2020Fair value – 12/31/2021Bond investment4,000,0002,800,0003,600,000Share investment7,000,0007,400,0008,000,000The business model for the bond investment is to collect contractual cash flows composed of principal andinterest, and sell the asset. The bonds were purchased at face amount of P4,000,000.The ordinary shares are nontrading and the entity elected to present fair value changes in other comprehensiveincome. On January 1, 2022, the entity sold the bonds and share for P5.000.000 and P9,000,000 respectively.Situation 2 On January 1 2020, an entity purchased 9% bonds in the face amount of P3,000,000 forP2,776,000 to yield 11%. The bonds mature on January 1 2025.The entity classified the bonds as held for trading and interest is payable annually every December 31. Thepair value of the bonds and effective rate were:Fair ValueEffective RateDecember 31, 20202,758,00012%December 31, 20213,078,0008%On December 31, 2021, the entity changed its business model for this investment to collecting contractualcash flows composed of principal and interest. On January 1. 2022, the fair value of the bonds was the sameas of December 31, 2021.

Interest Income: The revenue you have from a bond investment, the interest payments made by its…

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What is the interest income on the bond investment for the year 2022? What is the carrying amount of the bond investment on December 31, 2022?

FINANCIAL ACCOUNTING

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Chapter1: Financial Statements And Business Decisions

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Question

What is the interest income on the bond investment for the year 2022?

What is the carrying amount of the bond investment on December 31, 2022?

Situation 1 An entity included the following investments at cost and fair value:
Cost
Fair value – 12/31/2020
Fair value – 12/31/2021
Bond investment
4,000,000
2,800,000
3,600,000
Share investment
7,000,000
7,400,000
8,000,000
The business model for the bond investment is to collect contractual cash flows composed of principal and
interest, and sell the asset. The bonds were purchased at face amount of P4,000,000.
The ordinary shares are nontrading and the entity elected to present fair value changes in other comprehensive
income. On January 1, 2022, the entity sold the bonds and share for P5.000.000 and P9,000,000 respectively.
Situation 2 On January 1 2020, an entity purchased 9% bonds in the face amount of P3,000,000 for
P2,776,000 to yield 11%. The bonds mature on January 1 2025.
The entity classified the bonds as held for trading and interest is payable annually every December 31. The
pair value of the bonds and effective rate were:
Fair Value
Effective Rate
December 31, 2020
2,758,000
12%
December 31, 2021
3,078,000
8%
On December 31, 2021, the entity changed its business model for this investment to collecting contractual
cash flows composed of principal and interest. On January 1. 2022, the fair value of the bonds was the same
as of December 31, 2021.

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