Reference no: EM133157454
Question - DY Co. purchased P2,000,000, 8% bonds for P1,845,570 on January 1, 2018. DY classified the bonds as available for sale. The bonds were purchased to yield 10% interest. Interest is payable semiannually on July 1 and January 1. The bonds mature on January 1, 2023.DY uses the effective interest method to amortize premium or discount. On January 2, 2020, the fair value of the bonds did not change from the previous reporting period end. On this date, DY sold the bonds for its fair value after receiving interest to meet its liquidity needs.
The market values of the bonds are as follows:
December 31, 2018 P1,904,490
December 31, 2019 1,863,630
Required - Based on the above and the result of your audit, determine the following:
1. Interest income for the year 2018.
2. Unrealized gain on available-for-sale securities as of December 31, 2018.
3. Interest income for the year 2019.
4. Unrealized gain or loss on available-for sale securities as of December 31, 2019.
5. Realized gain or loss on sale of available-for -sale securities on January 2, 2020.
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