How much is the gain (loss) on reclassification on January 1, 20x2?
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter9: Long-term Liabilities
Section: Chapter Questions
Problem 7MCQ
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Question
On January 1, 20x1, Dagul Co. acquired 10%, ₱4,000,000 bonds for ₱3,807,853. The principal is
due on January 1, 20x4 but interest is due annually starting December 31, 20x1. The yield rate
on the bonds is 12%. On July, 1 20x1, Dagul Co. changed its business model. It was ascertained
that the investment in bonds at amortized cost should be reclassified to held for trading securities
on reclassification date. The bonds were quoted at 102, 103 and 104 on July 1, 20x1, December
31, 20x1 and January 1, 20x2, respectively. How much is the gain (loss) on reclassification on
January 1, 20x2?
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