Reference no: EM132864538
On May 1, 2019, LAG Co. purchased a short-term P2,000,000 face value, 9% debt instruments for P1,860,000 including the accrued interest and classified it as a trading security. The debt instruments mature on January 1, 2022, and pay interest semi-annually on January 1 and July 1. On December 31, 2019, the fair market value of the instruments is 98%. On March 2, 2020, LAG Co. sold the trading security for P1,980,000.
Required:
Question 1: How much will be recognized as gain (loss) on sale of trading security on 2020 income statement?
a. (P10,000)
b. P20,000
c. P120,000
d. P150,000
Question 2: What amount should LAG Co. report for short-term debt securities on December 31, 2019?
a. P1,800,000
b. P1,860,000
c. P1,960,000
d. P1,980,000
Question 3: How much will be recognized as income on the 2019 income statement?
a. P100,000
b. P120,000
c. P160,000
d. P220,000
e. P280,000
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