On Jan. 1, 2021, ABC acquired a 10%, 5-year, P2,000,000 face value bonds for trading purposes. The transaction price was P2,020,000 while transaction cost incurred totaled P57,793. This resulted to an effective interest rate of 9%. The value of the bonds was P2,010,000 and P1,970,000 as of Dec. 31, 2021 and 2022 respectively which resulted to ABC being unable to dispose the investment. In the year 2023, the management decided to hold the investment until its maturity. As of the end of 2023, the bonds are valued at P1,965,750. The effective interest rate as of this date is 11%. Assuming the investment qualifies for reclassification, what is the interest income for the year 2024?
On Jan. 1, 2021, ABC acquired a 10%, 5-year, P2,000,000 face value bonds for trading purposes. The transaction price was P2,020,000 while transaction cost incurred totaled P57,793. This resulted to an effective interest rate of 9%. The value of the bonds was P2,010,000 and P1,970,000 as of Dec. 31, 2021 and 2022 respectively which resulted to ABC being unable to dispose the investment. In the year 2023, the management decided to hold the investment until its maturity. As of the end of 2023, the bonds are valued at P1,965,750. The effective interest rate as of this date is 11%. Assuming the investment qualifies for reclassification, what is the interest income for the year 2024?
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 1RE
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On Jan. 1, 2021, ABC acquired a 10%, 5-year, P2,000,000 face value bonds for trading purposes. The transaction price was P2,020,000 while transaction cost incurred totaled P57,793. This resulted to an effective interest rate of 9%. The value of the bonds was P2,010,000 and P1,970,000 as of Dec. 31, 2021 and 2022 respectively which resulted to ABC being unable to dispose the investment. In the year 2023, the management decided to hold the investment until its maturity. As of the end of 2023, the bonds are valued at P1,965,750. The effective interest rate as of this date is 11%.
Assuming the investment qualifies for reclassification, what is the interest income for the year 2024?
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