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Problem 1 On January 1, 2020. Shrek Company purchased as a long-term investment P5,000,000 face value of Dunk Company's 8% bonds for P4,562,000. The bonds were purchased to yield 10% interest annually on December 31. The bonds mature on January 1, 2025. Shrek uses the effective interest method. What is the carrying amount of the investment (rounded to nearest P100) on December 31, 2021? a. 4,680,000 b. 4,662,000 C. 4,618,000 d. 4,562,000

Problem 1 On January 1, 2020. Shrek Company purchased as a long-term investment P5,000,000 face value of Dunk Company's 8% bonds for P4,562,000. The bonds were purchased to yield 10% interest annually on December 31. The bonds mature on January 1, 2025. Shrek uses the effective interest method. What is the carrying amount of the investment (rounded to nearest P100) on December 31, 2021? a. 4,680,000 b. 4,662,000 C. 4,618,000 d. 4,562,000

Intermediate Accounting: Reporting And Analysis
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
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Problem 1 On January 1, 2020. Shrek Company purchased as a long-term investment P5,000,000 face value of Dunk Company's 8% bonds for P4,562,000. The bonds were purchased to yield 10% interest annually on December 31. The bonds mature on January 1, 2025. Shrek uses the effective interest method. What is the carrying amount of the investment (rounded to nearest P100) on December 31, 2021? a. 4,680,000 b. 4,662,000 C 4,618,000 d. 4,562,000 Problem 2-3 On January 1, 2016, Whistledown Company purchased 5-year bonds with face value of P8,000,000 and stated interest of 10% per year payable semiannually January 1 and July 1. The bonds were acquired to yield 8%. Present value of an annuity of 1 for 10 periods at 5% 7.72 Present value of an annuity of 1 for 10 periods at 4% Present value of 1 for 10 periods at 4% 8.11 0.6756 1. What is the purchase price of the bonds? a. 7,382,400 b. 8,617,600 C. 8,648,800 d. 7,351,200 2. What is the carrying amount of the bond investment on December 31, 2016? a. 8,594,752 b. 8,540,704 C. 8,538,542 d. 8,302,848
Transcribed Image Text:Problem 1 On January 1, 2020. Shrek Company purchased as a long-term investment P5,000,000 face value of Dunk Company's 8% bonds for P4,562,000. The bonds were purchased to yield 10% interest annually on December 31. The bonds mature on January 1, 2025. Shrek uses the effective interest method. What is the carrying amount of the investment (rounded to nearest P100) on December 31, 2021? a. 4,680,000 b. 4,662,000 C 4,618,000 d. 4,562,000 Problem 2-3 On January 1, 2016, Whistledown Company purchased 5-year bonds with face value of P8,000,000 and stated interest of 10% per year payable semiannually January 1 and July 1. The bonds were acquired to yield 8%. Present value of an annuity of 1 for 10 periods at 5% 7.72 Present value of an annuity of 1 for 10 periods at 4% Present value of 1 for 10 periods at 4% 8.11 0.6756 1. What is the purchase price of the bonds? a. 7,382,400 b. 8,617,600 C. 8,648,800 d. 7,351,200 2. What is the carrying amount of the bond investment on December 31, 2016? a. 8,594,752 b. 8,540,704 C. 8,538,542 d. 8,302,848
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