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Test bank FVPL, Fvoci,FVAC
Accountancy (Divine Word College of Calapan)
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Integrated Review 1
Standalone assignment
Quiz 1.03 FVPL/FVOCI/FAAC
Submissions
Here are your latest answers:
Question 1
On January 1, 200A, Gelyka Company purchased 12% bonds with face amount of P5,000,000 for P5,500,000 including transaction cost of P100,000. The bonds provide an
effective yield of 10%.
The bonds are dated January 1, 200A and pay interest annually on December 31 of each year.
The bonds are quoted at 115 on December 31, 200A. The entity has irrevocably elected the fair value option.
What amount of interest income should b reported for 200A?
Response: 600,000
Feedback:
600,000
Interest income (12% x 5,000,000)
Correct answer: 600,000
Score: 1 out of 1 Yes
Question 2
Neal Company held the following financial assets as trading investments on December 31, 200A:
Cost
100,000 shares of Company A nonredeemable preference share capital, par value P75
Market value
775,000
825,000
690,000
1,465,000
625,000
1,450,000
7,000 shares of Company B preference share capital, par value P100, subject to mandatory
redemption by the issuer at par on December 31, 200B
On December 31, 200A, what is the total carrying amount of the investments?
Response: 1,450,000
Feedback: The nonredeemable preference share is an equity security.
The redeemable preference share is a debt security.
Whether equity or debt security, financial assets held for trading are measured at fair value through profit or loss.
Correct answer: 1,450,000
Score: 1 out of 1 Yes
Question 3
Wood Company owns 20,000 shares of Arlo Company's 200,000 shares of P100 par, 6% cumulative, nonparticipating preference share capital and 10,000 shares
representing 2% ownership of Arlo's ordinary share capital.
During 200B, Arlo Company declared and paid preference dividends of P2,400,000. No dividends had been declared or paid during 200A.
In addition, Wood Company received a 5% share dividend on ordinary share from Arlo Company when the quoted market price of Arlo's ordinary share was P10.
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What amount should be reported as dividend income for 200B?
Response: 240,000
Feedback:
Dividend income on preference share
240,000
(20,000/200,000% 3 10% x 2,400,000)
Correct answer: 240,000
Score: 1 out of 1 Yes
Question 4
On January 1, 200A, Myopic Company purchased bonds with face amount of P2,000,000 for P1,900,500 including transaction cost of P100,500.
The business model for this investment is to collect contractual cash flows which are solely payments of principal and interest.
The entity did not elect the fair value option.
The bonds mature on December 31, 200C and pay 8% interest annually every December 31 with a 10% effective yield.
On December 31, 200A, the entity changed the business model for this investment to collect contractual cash flows and to sell the financial asset in the open market.
The bonds are quoted at 110 on January 1, 200B and 120 on December 31, 200B.
What cumulative amount in OCI is recognized in the statement of changes in equity for 200B?
Response: 436,395
Feedback:
Table of amortization
Date
Interest received
Interest Income
Discount amortization
1/1/200A
Carrying amount
1,900,500
12/31/200A
160,000
190,050
30,050
1,930,550
12/31/200B
160,000
193,055
33,055
1,963,605
Fair value December 31, 200B (2,000,000 x 120)
2,400,000
Carrying amount per table - December 31, 200A
(1,963,605)
Cumulative unrealized gain in OCI - 12/31/200B
436,395
Correct answer: 436,395
Score: 1 out of 1 Yes
Question 5
On January 1, 200B, Muchos Company purchased 4,000 shares of another entity for P110 per share. Transaction costs amounted P12,000. The investment is measured at
fair value through other comprehensive income. A P10 dividend per share had been declared on December 15, 200A, to be paid on March 31, 200B to share holders of
record on January 31, 200B. No other transactions occurred in 200B affecting the investment. The shares sells for P480,000 on December 31, 200B, transaction cost that
would have been incurred upon sale is P15,000.
What is the initial measurement of the investment on January 31,200B?
Response: 412,000
Feedback:
Purchase price of shares (dividends-on)
110
Dividends per share
(10)
Price of shares (ex-dividends)
100
Multiply: Number of shares bought
Purchase price of shares (ex-dividends)
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x
4,000
400,000
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Transaction cost
Initial measurement of investment
12,000
412,000
Correct answer: 412,000
Score: 1 out of 1 Yes
Question 6
On January 1, 200A, Reign Company purchased 12% bonds with face amount of P5,000,000 for P5,380,000 with an effective yield of 10%.
The bonds are dated January 1, 200A, mature on January 1, 2024 and pay interest annually on December 31 of each year.
The bonds are quoted at 120 on December 31, 200A. The entity has clected the fair value option for the bond investment.
What total income should be reported for 200A?
Response: 1,220,000
Feedback:
Market value - December 31, 200A (5,000,000 x 120)
Carrying amount- January 1, 200A
6,000,000
(5,380,000)
Gain from change in fair value
620,000
Interest income (5,000,000 x 12%)
600,000
Total income
1,220,000
PFRS 9, paragraph 4.1.5, provides that an entity at initial recognition may irrevocably designate a financial asset as measured at fair value through profit or loss even if the
financial asset satisfies the amortized cost measurement or fair value through other comprehensive income measurement.
In other words, investment in bonds can be designated irrevocably as measured at fair value through profit or loss even if the bonds are held for collection or held for
collection and for trading as business model.
Under the fair value option, all changes in fair value are recognized in profit or loss.
Moreover, the interest income is based on the nominal interest rate rather than the effective interest rate.
Correct answer: 1,220,000
Score: 1 out of 1 Yes
Question 7
On July 31, 200A, Colagen Company exchanged a land for 25,000 ordinary shares of Ace Company. On this date, the land's carrying amount was P2,500,000 and its fair
value was P3,300,000. On date of exchange, Ace Company shares have a par value of P60 and are unquoted in the market.
On November 15, 200A, Colagen received 2,500 of Ace's shares as a result of a share dividend declared during 200A On December 10, Colagen sold 7,500 shares for
P1,500,000.
What is the gain on sale of Investment in equity securities?
Response: 600,000
Feedback:
Selling price of shares sold
1,500,000
Carrying amount of shares sold
(900,000)
Gain on sale of investment
600,000
Fair value of asset given
3,300,000
Divide: Inclusive shares (25,000 + 2,500)
¸ 27,500
Carrying amount per share
Multiply: Shares sold
Carrying amount of shares sold
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120
7,500
900,000
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Correct answer: 600,000
Score: 1 out of 1 Yes
Question 8
At the beginniing of current year, Carmela Company acquired nontrading equity instrument for P4,000,000.
The transaction cost incurred amounted to P700,000.
The fair value of the instrument was P5,500,000 at year-end and the transaction cost that would be incurred on the sale of the investment is estimated at P600,000.
What amount of gain should be recognized in other comprehensive income for the current year?
Response: 800,000
Feedback:
Fair value
5,500,000
Acquisition cost
(4,700,000)
Unrealized gain other comprehensive income
800,000
Acquisition price
4,000,000
Transaction cost
700,000
Total acquisition cost of investment
4,700,000
Under PFRS 9, any transaction cost is included as part of the initial measurement of a financial asset measured at fair value through other comprehensive income or FVOCI.
The transaction cost that would be incurred on the sale of the investment is ignored because the equity investment at fair value through other comprehensive is measured at
fair value and not fair value less cost of disposal.
Correct answer: 800,000
Score: 1 out of 1 Yes
Question 9
On January 1, 200A, Gala Company purchased marketable debt securities, to be held as financial asset at fair value through profit or loss, for P5,038,800. The entity also
paid commission, taxes and other transaction costs amounting to P125,000. The principal amount of the debt security is P5,000,000 paying annual interest of 12.0% every
December 31. The securities have a market value of P5,418,800 on December 31, 200A. No securities were sold during 200A. The transaction cost that would be incurred
on the disposal of the investments are estimated at P75,000.
What is the Gala’s unrealized gain on financial asset at fair value through profit or loss?
Response: 380,000
Feedback:
Market value of Trading Security on December 31, 200A
P
Measurement value of TS on January 1, 200A
5,418,800
(5,038,800)
Unrealized gain on Financial Asset at FVPL
P
380,000
The transsction cost that would be incurred on sale is ignored because the financial asset held for trading is measured at fair value and not at fair value less cost of disposal.
Correct answer: 380,000
Score: 1 out of 1 Yes
Question 10
On December 31, 200A, Fay Company appropriately reported a P100,000 unrealized loss.
There was no change during 200B in the composition of the portfolio of nontrading equity securities held at fair value through other comprehensive income.
Security
Cost
Market value December 31, 200B
A
1,200,000
1,300,000
B
900,000
500,000
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C
1,600,000
3,700,000
1,500,000
3,300,000
What amount of loss on these securities should be included in the statement of comprehensive income for the year ended December 31,200B as component of other
comprehensive income?
Response: 300,000
Feedback:
Market value - December 31, 200B
3,300,000
Original historical cost
(3,700,000)
Cumulative unrealized loss- December 31, 200B
(400,000)
Unrealized loss in 200A
100,000
Unrealized loss in 200B
(300,000)
Only the unrealized loss of P300,000 is shown in the statement of comprehensive income for 200B as component of other comprehensive.
Correct answer: 300,000
Score: 1 out of 1 Yes
Question 11
On January 1, 200A, Queen Company purchased bonds with face amount of P5,000,000 for P4,760,000 including transaction cost of P160,000.
The business model is to collect contractual cash flows and to sell the financial asset.
The bonds mature on December 31, 200C and pay 10% interest annually on December 31 with a 12% effective yield.
The bonds are quoted at 102 on December 31. 200A and 105 on December 31,200B. The bonds are sold on June 30, 200C plus accrued interest.
What amount of unrealized gain should be reported as component of other comprehensive income for 200A?
Response: 268,800
Feedback: PFRS 9. paragraph 4.1.2A, provides that a financial asset shall be measured at fair value through other comprehensive income if both of the following conditions
are met:
a. The business model is achieved both by collecting contractual cash flows and by selling the financial asset.
b. The contractual cash flows are solely payments of principal and interest on the principal outstanding.
Note that the business model includes selling the financial asset in addition to collecting contractual cash flows.
In this case, interest income is recognized using the effective interest method as in amortized cost measurement.
On derecognition, the cumulative gain or loss recognized in other comprehensive income shall be reclassified to profit or loss.
Table of amortization of discount
Date
Interest received
Interest Income
Discount amortization
1/1/200A
Carrying amount
4,760,000
12/31/200A
500,000
571,200
71,200
4,831,200
12/31/200B
500,000
579,744
79,744
4,910,944
12/31/200C
500,000
589,056
89,056
5,000,000
Interest received is equal to 10% multiplied by face amount.
Interest income is equal to 12% multiplied by carrying amount.
The transaction cost is part of the cost of the bond investment if the financial asset is measured at fair value through other comprehensive income.
Market value December 31, 200A (5,000,000 x 102%)
Carrying amount-December 31, 200A
Unrealized gain-OCI for 200A
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5,100,000
(4,831,200)
268,800
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Correct answer: 268,800
Score: 1 out of 1 Yes
Question 12
At the beginning of current year, Alexis Company purchased marketable equity securities to be held as "trading" for P5,000,000. The entity also paid transaction cost
amounting to P200,000.
The securities had a market value of P5,500,000 at year-end and the transaction cost that would be incurred on sale is estimated at P100,000. No securities were sold during
the current year.
What amount of unrealized gain or loss on these securities should be reported in the income statement for the current year?
Response: 500,000 gain
Feedback:
Fair value
Acquisition cost-Trading
Unrealized gain -included in profit or loss
5,500,000
(5,000,000)
500,000
Under PFRS 9, any transaction cost is not included as part of the initial measurement of a financial asset at fair value through profit or loss.
A financial asset held for "trading" is a financial asset measured at fair value through profit or loss.
The transsction cost that would be incurred on sale is ignored because the financial asset held for trading is measured at fair value and not at fair value less cost of disposal.
Correct answer: 500,000 gain
Score: 1 out of 1 Yes
Question 13
Trinidad Company provided the following portfolio of equity investments measured at fair value through other comprehensive income:
Aggregate cost- December 31, 200A
1,700,000
Unrealized gain December 31, 200A
40,000
Unrealized loss - December 31, 200A
260,000
Net realized gain during 200A
300,000
On January 1, 200A, the entity reported an unrealized loss of P15,000 as a component of other comprehensive income.
In the 200A statement of changes in equity, what cumulative amount should be reported as unrealized loss on these securities?
Response: 220,000
Feedback:
Unrealized loss
260,000
Unrealized gain
(40,000)
Cumulative net unrealized loss December 31, 200A
220,000
Unrealized loss - January 1, 200A
(15,000)
Increase in unrealized loss
205,000
The increase in unrealized loss of P205,000 is reported in the statement of comprehensive income as component of other comprehensive income.
However, the statement of changes in equity for 200A would report the cumulative net unrealized loss of P220,000.
Incidentally, the net realized gain represents gain from the investment that is actually sold and should be directly credited to retained earnings.
Correct answer: 220,000
Score: 1 out of 1 Yes
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Question 14
At year-end, Rim Company held several investments with the intent of selling them in the near term. The investments consisted of P1,000,000 8% five-year bonds
purchased for P920,000 and equity securities purchased for P350,000. At year-end, the bonds were selling on the open market for P1,050,000 and the equity securities had a
market value of P500,000.
What amount should be reported as trading securities at year-end?
Response: 1,550,000
Feedback:
Bond investment
1,050,000
Equity investment
500,000
Total market value
1,550,000
Trading investments are measured at fair value through profit or loss (FVPL).
Correct answer: 1,550,000
Score: 1 out of 1 Yes
Question 15
On August 30, Valedictorian effected a stock split up 2-to-1. It also issued rights to subscribe to its stock on September 15, the ownership of 4 shares entitling the
shareholders to subscribe for 1 share at P50.00. The Valedictorian's share is quoted rights-on at P62.50. On August 15, Vast Company acquired 50,000 shares of
Valedictorian Company with total cost of P5,000,000. The stock rights are accounted for separately. Vast exercised 40,000 stock rights and sold the remainder for P8.00
each.
What is the cost to Vast Company of the new investment in Valedictorian Company?
Response: 650,000
Feedback:
Correct answer: 600,000
Score: 0 out of 1 No
Question 16
On January 1, 200A, Remington Company acquired 200,000 ordinary shares of Universal Company for P9,000,000.
At the time of purchase, universal Company had outstanding 800,000 shares with a carrying amount of P36,000,000.
The following events took place during the year:
•
Universal Company reported net income of P1,800,000 for the calendar year 200A.
•
Remington Company received from Universal Company a dividend of P0.75 per ordinary share.
•
The market value of Universal Company share had temporarily declined to P40.
Remington Company has elected irrevocably to measure the investment at fair value through other comprehensive income.
What is the carrying amount of the investment on December 31, 200A?
Response: 8,000,000
Feedback: Market value - December 31, 200A (200,000 x 40)
8,000,000
Although the interest is 25%, 200,000 shares divided by 800,000 shares, the equity method is not applied because the entity has elected to measure the equity investment at
fair value through other comprehensive income or FVOCI.
The unrealized loss on the financial asset of P1,000,000 (P9,000,000 - P8,000,000) is shown in the statement of comprehensive income as component of other
comprehensive income.
Correct answer: 8,000,000
Score: 1 out of 1 Yes
Question 17
On January 1, 200A, Michelle Company purchased bonds with face amount of P5,000,000. The entity paid P4,600,000 plus transaction cost of P142,000.
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The bonds mature on December 31, 200C and pay 6% interestnnually on December 31 of each year with 8% effective yield.
The bonds are quoted at 105 on December 31, 200A and 110 on December 31, 200B.
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
What cumulative amount of unrealized gain should be reported as component of other comprehensive income in the statement of changes in equity for 200B?
Response: 592,931
Feedback:
Correct answer: 164,291
Score: 0 out of 1 No
Question 18
On January 1, 200A, Venus Company purchased 10% bonds with face value of P5,000,000 plus transaction cost of P101,500 with a yield rate of 8%. The bonds mature on
December 31, 200E and pay interest annually on December 31. The carrying amount of the investment on December 31, 200A using the effective interest method is
P5,333,620.
What is the initial acquisition cost of the bond investment?
Response: 5,401,500
Feedback:
Carrying amount - December 31, 200A
Add: Nominal interest (5,000,000 x 10%)
Total
Divide by (100% + 8%)
Total acquisition cost
5,333,620
500,000
5,833,620
108%
5,401,500
Correct answer: 5,401,500
Score: 1 out of 1 Yes
Question 19
On January 1, 200A, Gala Company purchased marketable debt securities, to be held as financial asset at fair value through profit or loss, for P5,038,800. The entity also
paid commission, taxes and other transaction costs amounting to P125,000. The principal amount of the debt security is P5,000,000 paying annual interest of 12.0% every
December 31. The securities have a market value of P5,418,800 on December 31, 200A. No securities were sold during 200A. The transaction cost that would be incurred
on the disposal of the investments are estimated at P75,000.
What is the amount of Gala’s interest income for 200A?
Response: 600,000
Feedback:
Correct answer: 604,656
Score: 0 out of 1 No
Question 20
On March 1, Evan Company purchased 10,000 ordinary shares at P80 per share.
On September 30, Evan Company received 10,000 share rights to purchase an additional 10,000 shares at P90 per share.
On September 30, the share had a market value P95 and the share right had a market value of P5.
What amount should be reported for investment in share rights on September 30?
Response: 50,000
Feedback:
Initial measurement at fair value (10,000 rights x 5)
50,000
Correct answer: 50,000
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Score: 1 out of 1 Yes
Question 21
On January 1, 200A, Complex Company 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, 200D and pay 6% interest annually on December 31 of each year with 8% effective yield.
The bonds are quoted at 105 on December 31, 200A and 110 on December 31, 200B.
The business model in managing the financial asset is to collect contractual cash flows and also to sell the bonds in the open market.
The entity has not elected the fair value option.
On December 31, 200B, the entity changed the business model to collect only contractual cash flows.
On December 31, 200C, the bonds are quoted at 15 and the market rate of interest is 10%.
What is the carrying amount of the investment on December 31, 200C?
Response: 4,907,171
Feedback:
Table of amortization
Date
Interest received
Interest Income
Discount amortization
Carrying amount
1/1/200A
4,668,600
12/31/200A
300,000
373,488
73,488
4,742,088
12/31/200B
300,000
379,367
79,367
4,821,455
12/31/200C
300,000
385,716
85,716
4,907,171
12/31/200C
300,000
392,829
92,829
5,000,000
On December 31, 200B, the entity changed the business model to collect only contractual cash flows.
Accordingly, the bond investment is reclassified from FVOCI to amortized cost and the reclassification is recognized on January 1, 200C.
On such date, the cumulative unrealized gain of P678,545 is eliminated. As a result, the bond investment is reverted back to amortized cost measurement.
The market value on December 31, 200C is ignored and the original effective rate is not adjusted.
Correct answer: 4,907,171
Score: 1 out of 1 Yes
Question 22
On January 1, 200A, Gelyka Company purchased 12% bonds with face amount of P5,000,000 for P5,500,000 including transaction cost of P100,000. The bonds provide an
effective yield of 10%.
The bonds are dated January 1, 200A and pay interest annually on December 31 of each year.
The bonds are quoted at 115 on December 31, 200A. The entity has irrevocably elected the fair value option.
What amount of gain from change in fair value should be reported
Response: 350,000
Feedback:
Purchase price
5,500,000
Transaction cost
(100,000)
Adjusted cost
5,400,000
The transaction cost is expensed immediately if the financial asset is measured at fair value through profit or loss.
Market value (5,000,000 x 115)
Adjusted cost
Gain from change in fair value
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5,750,000
(5,400,000)
350,000
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Correct answer: 350,000
Score: 1 out of 1 Yes
Question 23
On January 1, 200A, Soledad Company purchased 10% bonds in the face amount of P3,000,000.
The bonds mature on January 1, 200K and were purchased for P3,405,000 to yield 8%.
The entity used the effective interest method of amortization and interest is payable annually every December 31.
The business model for this investment is to collect contractual cash flows composed of interest and principal.
On December 31, 200B, the entity changed the business model for this investment to realize fair value changes.
On January 1,200C, the fair value of the bonds was P2,845,000 at an effective rate of 11%.
What amount in profit or loss should be recognized in 200C as a result of the reclassification?
Response: 502,592
Feedback:
Table of amortization
Date
Interest received
Interest Income
Premium amortization
Carrying amount
1/1/200A
3,405,000
12/31/200A
300,000
272,400
27,600
3,377,400
12/31/200B
300,000
270,192
29,808
3,347,592
Fair value - January 1, 200C
2,845,000
Carrying amount- January 1, 200C per table
(3,347,592)
Loss on reclassification
(502,592)
On January 1,200C, the reclassification date, the entity will reclassify the bond investment from amortized cost to fair value through profit or loss.
The difference between the fair value and previous carrying amount on such date is recognized in profit of loss.
Correct answer: 502,592
Score: 1 out of 1 Yes
Question 24
On January 1, 200A, Gelyka Company purchased 12% bonds with face amount of P5,000,000 for P5,500,000 including transaction cost of P100,000. The bonds provide an
effective yield of 10%.
The bonds are dated January 1, 200A and pay interest annually on December 31 of each year.
The bonds are quoted at 115 on December 31, 200A. The entity has irrevocably elected the fair value option.
What total amount of income from the investment should be reported in the income statement for 200A?
Response: 950,000
Feedback:
Correct answer: 890,000
Score: 0 out of 1 No
Question 25
The following information relating ot a bond investment are provided to you as of January 1, 200A:
Face value
Maturity Date
Nominal rate paid annually every Dec 31
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3,000,000
Dec 31, 200E
10.0%
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Investment's effective rate
Carrying amount
12.0%
2,782,500
On September 1, 200A, the bond investment was sold to yield 9%. The seller received P3,326,100.
What is the gain on sale of investment in bonds?
Response: 321,000
Feedback:
Proceeds of bond investment
3,326,100
Less: Accrued interest (P3,000,000x10%x8/12)
(200,000)
Selling price of bond
3,126,100
Less: Carrying amount of bond
(2,805,100)
Gain on sales of bonds
321,000
Carrying amount on January 1
2,782,500
Multiply: Effective rate
x 12.0%
Annual effective interest
333,900
Multiply: Interest period
x 8/12
Effective interest from Jan 1 to Sep 1
222,600
Less: Nominal interest from Jan 1 to Sep 1 (P3,000,000x10%x8/12)
(200,000)
Discount amortization Sep 1
22,600
Carrying amount on January 1
2,782,500
Carrying amount on Sep 1
2,805,100
Correct answer: 321,000
Score: 1 out of 1 Yes
Question 26
On January 1, 200A, Knit Company purchased 8% bonds in the face amount of P8,000,000.
The bonds mature on January 1, 200F and were purchased for P8,670,000 to yield 6%. Interest is payable annually every December 31.
The business model for this investment is to collect contractual cash flows and to sell the bonds in the open market.
Fair value
Effective rate
12/31/200A
7,740,000
9%
12/31/200B
7,230,000
12%
On December 31, 200B, the entity changed the business model to collect contractual cash flows only.
On January 1,200C, the fair value of the bonds did not change.
What amount should be reported as interest income for 200A?
Response: 720,000
Feedback:
Correct answer: 520,200
Score: 0 out of 1 No
Question 27
Wray Company provided the following data for the current year:
•On September 1, Wray received a P500,000 cash dividend from Seco Company in which Wray owns a 30% interest.
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•On October 1, Wray received a P60,000 liquidating dividend from King Company. Wray owns a 5% interest in King.
•Wray owns a 10% interest in Bow Company, which declared and paid P2,000,000 cash dividend on November 15.
What amount should be reported as dividend income for the current year?
Response: 500,000
Feedback:
200,000
Cash dividend from Bow Company (10% x 2,000,000)
The cash dividend from Seco and the liquidating dividend from King are not income but reduction of the investment account.
Correct answer: 500,000
Score: 1 out of 1 Yes
Question 28
On January 1,200A, Dumaguete Company purchased bonds with face amount of P4,000,000 for P4,206,000.
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 bonds mature on December 31, 200C and pay 10% interest annually on December 31 each year with 8% effective yield.
The bonds are quoted at 95 on December 31, 200A and 90 on December 31, 200B.
What amount of unrealized loss should be reported as component other comprehensive income in 200A?
Response: 342,480
Feedback:
Table of amortization
Date
Interest received
Interest Income
Premium amortization
1/1/200A
Carrying amount
4,206,000
12/31/200A
400,000
336,480
63,520
4,142,480
12/31/200B
400,000
331,398
68,602
4,073,878
12/31/200C
400,000
326,122
73,878
4,000,000
Interest received is equal to 10% multiplied by face amount.
Interest income is equal to 8% multiplied by carrying amount.
Market value - December 31, 200A (4,000,000 x 95)
Carrying amount per table - December 31, 200A
Unrealized loss - 200A
3,800,000
(4,142,480)
(342,480)
Correct answer: 342,480
Score: 1 out of 1 Yes
Question 29
Jent Company purchased bonds at a discount of P100,000. Subsequently, Jent sold these bonds at a premium of P140,000. During the period that Jent held this long-term
investment, amortization of the discount amounted to P20,000.
What amount should be reported as gain on sale of bonds?
Response: 220,000
Feedback:
Premium on sale of bonds
Unamortized discount (100,000 - 20,000)
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140,000
80,000
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Gain on sale of bonds
220,000
Correct answer: 220,000
Score: 1 out of 1 Yes
Question 30
On July 1, 200A, Pell Company purchased Green Company ten-year, 8% bonds with a face amount of P5,000,000 for P4,200,000.
The bonds mature on June 30, 200K and pay interest semiannually on June 30 and December 31.
Using the interest method, the entity recorded bond discount amortization of P18,000 for the six months ended December 31, 200A.
What amount should be reported as interest income for 200A?
Response: 218,000
Feedback:
Interest received from July 1 to December 31, 200A.
(5.000.000 x 8% x 6/12)
Bond discount amortization for six months
Interest income for 200A
200,000
18,000
218,000
Correct answer: 218,000
Score: 1 out of 1 Yes
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