On January 1, 2019, AB Company purchased P1,000,000, 12% bonds of C Company for a price that yields 10%. Interest on these bonds is payable every December 31. The debt investment will mature on December 31, 2021. On April 1, 2021, to pay a maturing obligation, AB Company sold P600,000 face value bonds at P105 plus accrued interest. The journal entry for the accrual of interest is appropriately recorded prior to the sale. Market values of the bond on different dates are as follows: 12/31/2019-108; 12/31/2020-106; 12/31/2021 - 104. If the company's business model is to collect contractual cash flows and to sell, how much is the gain (loss) on sale of debt investment on 4/1/2021?
On January 1, 2019, AB Company purchased P1,000,000, 12% bonds of C Company for a price that yields 10%. Interest on these bonds is payable every December 31. The debt investment will mature on December 31, 2021. On April 1, 2021, to pay a maturing obligation, AB Company sold P600,000 face value bonds at P105 plus accrued interest. The journal entry for the accrual of interest is appropriately recorded prior to the sale. Market values of the bond on different dates are as follows: 12/31/2019-108; 12/31/2020-106; 12/31/2021 - 104. If the company's business model is to collect contractual cash flows and to sell, how much is the gain (loss) on sale of debt investment on 4/1/2021?
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 1MC
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On January 1, 2019, AB Company purchased P1,000,000, 12% bonds of C Company for a price that yields 10%. Interest on these bonds is payable every December 31. The debt investment will mature on December 31, 2021. On April 1, 2021, to pay a maturing obligation, AB Company sold P600,000 face
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