17. On Jan. 1, 20x1, Yngwie Co. purchased P6,000,000, 10% bonds issued by Malmsteen, Inc. for P5,116,292. The bonds together with compounded interest are due on Dec. 31, 20x3. What i the effective interest rate on the bonds and how much is the carrying amount of the investment on Dec. 31, 20x2? a. 18%; 7,897,017 b. 16%; 5,624,483 c. 16%; 6,884,483 d. 8%; 4,928,774 18. On Jan. 1, 20x1, Zach Co. purchases P2,000,000 par value of unquoted perpetual preference shares issued by Bandolin Co. for P1,700,000. Zach incurs acquisition costs of P25,218. The shares have a fixed non-discretionary dividend rate of 6% per annum, which approximates the market rate of interest for perpetual instruments. If there are insufficient distributable profits to pay the dividend in one year, the dividend will roll forward and become payable in the future. Interest accrues on deferred amounts. Zach holds the investment under a 'hold to collect business model and estimates a five-year holding period. The effective interest rate is 3%. On Dec. 31, 20x3, the investment is redeemed at a premium of P200,000. How much is the gain (loss) recognized on redemption date? a. 0 b. 500,000 c. 314,808 d. 269,321

17. On Jan. 1, 20x1, Yngwie Co. purchased P6,000,000, 10% bonds issued by Malmsteen, Inc. for P5,116,292. The bonds together with compounded interest are due on Dec. 31, 20x3. What i the effective interest rate on the bonds and how much is the carrying amount of the investment on Dec. 31, 20x2? a. 18%; 7,897,017 b. 16%; 5,624,483 c. 16%; 6,884,483 d. 8%; 4,928,774 18. On Jan. 1, 20x1, Zach Co. purchases P2,000,000 par value of unquoted perpetual preference shares issued by Bandolin Co. for P1,700,000. Zach incurs acquisition costs of P25,218. The shares have a fixed non-discretionary dividend rate of 6% per annum, which approximates the market rate of interest for perpetual instruments. If there are insufficient distributable profits to pay the dividend in one year, the dividend will roll forward and become payable in the future. Interest accrues on deferred amounts. Zach holds the investment under a 'hold to collect business model and estimates a five-year holding period. The effective interest rate is 3%. On Dec. 31, 20x3, the investment is redeemed at a premium of P200,000. How much is the gain (loss) recognized on redemption date? a. 0 b. 500,000 c. 314,808 d. 269,321

Financial Accounting

14th Edition

ISBN:9781305088436

Author:Carl Warren, Jim Reeve, Jonathan Duchac

Publisher:Carl Warren, Jim Reeve, Jonathan Duchac

Chapter15: Investments And Fair Value Accounting

Section: Chapter Questions

Problem 5E

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