Reference no: EM133010791

On January 1, 2019, Woot Company purchased 12% bonds with face amount of P5,000,000 for P5,500,000 including transaction cost of P100,000. The bonds provide an effective yield of 10%.

• The bonds are dated January 1, 2019 and pay interest annually on December 31 of each year. The bonds are quoted at 115 and 112 on December 31, 2019 and December 31, 2020 respectively. New effective interest rate for 2020 is 8%. This bond was held for trading.
• The entity changed its business model into FVOCI on January 1, 2020.

Problem 1: What amount of gain from change in fair value should be reported for 2019?

a. 750,000
b. 250,000
c. 0
d. 350,000

Problem 2: What amount of interest income should be reported for 2019?

a. 600,000
b. 550,000
c. 660,000
d. 300,000

Problem 3: What is the carrying amount of the bond investment on December 31, 2019?

a. 5,750,000
b. 5,500,000
c. 5,450,000
d. 5,400,000

Problem 4: What total amount of income from the investment should be reported in the income statement for 2019?

a. 540,000
b. 950,000
c. 890,000
d. 900,000