Reference no: EM132797122
P Co purchased a bond investment in Z Ltd. P's business model is to hold the investment to collect contractual cash flows and to sell when funds are needed for expansion.
Date of purchase: January 1, 2021
Purchase price: P4,200,000
Principal amount: P4,000,000
Cash interest: 5% per annum, payable on December 31
Effective interest: 3.8806% per annum
Maturity date: December 31, 2025
Fair value of the bond:
December 31, 2021 P4,894,000
December 31, 2022 P4,560,000
The bond was sold on December 31, 2022 at its fair value.
Required:
problem 1. Prepare the bond amortization table from inception to maturity date.
problem 2. Prepare the journal entries to record all transactions relating to the bond for the year ended December 31, 2021.
problem 3. Prepare the journal entries to record all transactions relating to the bond for the year ended December 31, 2022.
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