Pedro Co purchased a bond investment in Juan Company. The following are the data pertaining to Pedro’s Investments in Debt Security. Date of purchase: January 1, 2021 Purchase price: P4,200,000 Principal amount: P4,000,000 Cash interest: 5% per annum, payable on December 31 Effective interest: 3.8806% per annum Maturity date: December 31, 2025 Fair value of the bond: December 31, 2021 P4,894,000 December 31, 2022 P4,560,000 The bond was sold on December 31, 2022 at its fair value. If the bonds are held for collection of contractual cash flow and for sale of financial asset, what amount is the carrying value of Investment in 2022?
Pedro Co purchased a bond investment in Juan Company. The following are the data pertaining to Pedro’s Investments in Debt Security. Date of purchase: January 1, 2021 Purchase price: P4,200,000 Principal amount: P4,000,000 Cash interest: 5% per annum, payable on December 31 Effective interest: 3.8806% per annum Maturity date: December 31, 2025 Fair value of the bond: December 31, 2021 P4,894,000 December 31, 2022 P4,560,000 The bond was sold on December 31, 2022 at its fair value. If the bonds are held for collection of contractual cash flow and for sale of financial asset, what amount is the carrying value of Investment in 2022?
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 7E
Related questions
Question
Pedro Co purchased a bond investment in Juan Company. The following are the data pertaining to Pedro’s Investments in Debt Security.
|
Date of purchase: |
January 1, 2021 |
|
Purchase price: |
P4,200,000 |
|
Principal amount: |
P4,000,000 |
|
Cash interest: |
5% per annum, payable on December 31 |
|
Effective interest: |
3.8806% per annum |
|
Maturity date: |
December 31, 2025 |
|
Fair |
|
|
December 31, 2021 |
P4,894,000 |
|
December 31, 2022 |
P4,560,000 |
|
The bond was sold on December 31, 2022 at its fair value. |
|
If the bonds are held for collection of contractual
a.
4,200,000
b.
4,124,536
c.
3,800,000
d.
4,560,000
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step 1: Introduce carrying value of investment and impairment loss
VIEWStep 2: Calculate the Effective Interest Expense for 2022
VIEWStep 3: Adjust carrying value for interest income earned
VIEWStep 4: Determine if there's any impairment
VIEWStep 5: Calculate the carrying value after impairment
VIEWSolution
VIEW
Step by step
Solved in 6 steps with 4 images
Knowledge Booster
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.Recommended textbooks for you
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Cornerstones of Financial Accounting
Accounting
ISBN:
9781337690881
Author:
Jay Rich, Jeff Jones
Publisher:
Cengage Learning