ASSESSMENT
Activity 1
Problem 2:
1. D 6. A
2. D 7. A
3. D 8. A
4. A 9. D
5. A 10. A
Problem 3:
1. a. Amortization table
Date Interest teceived Interest income Amortization Present Value
Jan.1,20x1 1,060,747
Jan.1,20x2 140,000 127,290 12,710 1,048,037
Jan.1,20x3 140,000 125,764 14,236 1,033,801
Jan.1,20x4 140,000 124,056 15,944 1,017,857
Jan.1,20x5 140,000 122,143 17,857 1,000,000
b. Journal entries
Jan.1,20x1 Investment in bonds at amortized cost P1,060,747
Cash P1,060,747
Dec.31,20x1 Interest receivable 140,000
Interest income 127,290
Investment in bonds at amortized cost 12,710
Jan.1,20x2 Cash 140,000
Interest receivable 140,000
Dec.31,20x2 Interest receivable 140,000
Interest income 125,764
Investment in bonds at amortized cost 14,236
Jan.1, 20x3 Cash 140,000
Interest receivable 140,000
Dec.31,20x3 Interest receivable 140,000
Interest income 124,056
Investment in bonds at amortized cost 15,944
Jan.1, 20x4 Cash 140,000
Interest receivable 140,000
Dec.31,20x4 Interest receivable 140,000
Interest income 122,143
Investment in bonds at amortized cost 17,857
Jan. 1, 20x5 Cash 140,000
Interest receivable 140,000
Cash 1,000,000
Investment in bonds at amortized cost 1,000,000
C.)= ₱33,801
Solution:
Present value- Dec. 31, 20x2 1,033,801
Face amount (1,000,000)
Unamortized Premium- Dec. 31, 20x2 ₱33,801
D. = ₱26,199
Solution:
Sales Price(1M x 110%) ₱1,100,000
Transaction cost. (40,000)
Net Proceeds. 1,060,000
Carrying amount ot the.
date of sale(Jan. 1, 20x3) (1,033,801)
Gain on sale ₱26,199
Jan. 1, 20x3 Cash 1,060,000
Investment in bonds at amortized cost 1,033,801
Gain on sale 26,199
E. = ₱83,829
Solution:
Sales Price(1M x 98%x 6/12) 980,000
Transaction cost. (38,000)
Net Proceeds. 942,000
Carrying amount ot the.
date of sale(July 1, 20x3) (1,025,829)
Loss on sale (₱83,829)
July 1, 20x3 Cash 942,000
Loss on sale 83,829
Investment in bonds at amortized cost 1,025,829
2. A. Amortization table
Date Interest receivable Interest income Amortization Present value
Jan.1, 20x1 1,937,950
Dec.31,20x1 200,000 213,175 13,175 1,951,125
Dec.31, 20x2 200,000 214,624 14,624 1,965,749
Dec.31,20x3 200,000 216,232 16,232 1,981,982
Dec.31,20x4 200,000 218,018 18,018 2,000,000
B. Journal entries
Jan.1, 20x1 Investment in bonds at amortized cost P1,937,950
Cash P1,937,950
Dec.31,20x1 Cash 200,000
Investment in bonds at amortized cost 13,175
Interest income 213,175
Dec.31,20x2 Cash 200,000
Investment in bonds at amortized cost 14,624
Interest income 214,624
Dec.31,20x3 Cash 200,000
Investment in bonds at amortized cost 16,232
Interest income 216,232
Dec.31,20x4 Cash 200,000
Investment in bonds at amortized cost 18,018
Interest income 218,018
Dec.31,20x4 Cash 2,000,000
Investment in bonds at amortized cost 2,000,000
C. = ₱34,251
Solution:
Present value- Dec. 31, 20x2 1,965,749
Face amount (2,000,000)
Unamortized Discount- Dec. 31, 20x2 (₱34,251)
D. Current asset is ₱200,000 and non-current asset is ₱1,965,749
E.= ₱45,749
Solution:
Sales Price(2M x 98%) ₱1,960,000
Transaction cost. (40,000)
Net Proceeds. 1,920,000
Carrying amount of the.
date of sale(Jan. 1, 20x3) (1,965,749)
Loss on sale (₱45,749)
Jan.1,20x3 Cash 1,920,000
Loss on sale 45,749
Investment in bonds 1,965,749
F. = ₱73,067
Solution:
Sales Price(2M x 98% x 1/2) ₱1,080,000
Transaction cost. (20,000)
Net Proceeds. 1,060,000
Carrying amount of the date
of sale(July 1, 20x3) (986,933)
Gain on sale ₱73,067
July1,20x3 Cash 1,060,000
Investment in bonds 986,933
Gain on sale 73,067
3. Entry to recognize the bonds
April 1, Investment in bonds 1,960,000
20x1
Interest income 60,000
Cash 2,020,000
4. a. Provide the journal entries
Jan.1,20x1 Investment in bonds 4,166,027
Cash 4,166,027
b. Current & non-current portions of the investment on Dec. 31, 20x1
Date Principal Interest on oustanding principal balance Total collections
Dec.31,20x1 1,000,000 (4,000,000 x 12%) = 480,000 1,480,000
Dec.31,20x2 1,000,000 (3,000,000 x 12%) = 360,000 1,360,000
Dec.31,20x3 1,000,000 (2,000,000 x 12%) = 240,000 1,240,000
Dec.31,20x4 1,000,000 (1,000,000 x 12%) = 120,000 1,120,000
Date Collection Interest income Amortization Present value
Ja. 1, 20x1 4,166,027
Dec.31,20x1 1,480,000 416,603 1,063,397 3,102,630
Dec.31,20x2 1,360,000 310,263 1,049,737 2,052,893
Dec.31,20x3 1,240,000 205,289 1,034,711 1,018,182
Dec.31,20x4 1,120,000 101,818 1,018,182 ___
Current portion = ₱1,063,397
Non-current portion = ₱3,102,630
5. Amortization Table
Date Interest Unearned Pv of cash Interest Amorti- Present
income interest flow receivable zation value
Jan.1,20x1 Ignored 94,738 94,738
Dec.31,20x1 11,369 Ignored 106,107 10,000 1,369 96,107
Dec.31,20x2 12,733 Ignored 118,840 11,000 1,733 97,840
Dec.31,20x3 14,260 Ignored 133,100 12,100 2,160 100,000
a. = ₱10,000 & ₱11,000
b. = ₱96,107 & ₱97,840
c. All journal entries
Jan.1,20x1 Investment in bonds 94,738
Cash 94,738
Dec.31,20x1 Interest receivable 10,000
Interest in bonds 1,369
Interest income 11,369
Dec.31,20x2 Interest receivable 11,000
Interest in bonds 1,733
Interest income 12,733
Dec.31,20x3 Interest receivable 12,100
Interest in bonds 2,160
Interest income 14,260
Dec.31,20x4 Cash 133,100
Interest receivable 33,100
Interest in bonds 100,000
6. All journal entries
Jan.1, 20x1 Investment in bonds 907,135
Cash 907,135
Dec.31,20x1 Cash 100,000
Investment in bonds 26,999
Interest income 126,999
Dec.31,20x1 Investment in bonds -FVOCI 45,866
Urealized gain(loss) -OCI 45,866
Dec.31,20x2 Cash 100,000
Investment in bonds 30,779
Interest income 130,779
Dec.31,20x2 Investment in bonds -FVOCI 9,222
Unrealized gain(loss) -OCI 9,222
Jan.1, 20x3 Unrealized gain(loss) -OCI 10,000
Investment in bonds -FVOCI 10,000
Dec.31,20x3 Cash 100,000
Investment in bonds 35,088
Interest income 135,088
Dec.31,20x3 Cash 1,010,000
Investment in bonds 1,010,000
Dec.31,20x3 Unrealized gain(loss) -OCI 45,088
Gain on sale 45,088
Activity 2
Problem 4:
1. = C. 953,300
Solution: Amortization Table
Date Interest received Interest income Amortization Present value
7-1-2003 946,000
1-1-2004 40,000 47,300 7,300 953,300
........ ......... ......... ....... .........
2. = A. 65,389; 482,455
Solution: Amortization Table
Date Interest received Interest income Amortization Present value
1-1-20x1 453,567
12-31-20x1 50,000 63,499 13,499 467,066
12-31-20x2 50,000 65,389 15,389 482,455
12-31-20x3 50,000 67,544 17,544 500,000
3. = B.65,389; 510,000
Solution:
Investment in bonds -FVOCI
Jan. 1, 20x1 453,567
Dec. 31, 20x1 13,499
Dec. 31, 20x2 15,389
Dec. 31, 20x2(Fair value 27,545
change)
End. 510,000
4. = C.12,545 -Amortized cost; 0 -FVOCI
Solution:
Amortized cost FVOCI
Fair value(5K x 102) 510,000 Fair value(5K x 102) 510,000
Transaction cost (15,000) Carrying Amount -20x2 ( 482,455)
Net Proceeds 495,000 Cumulative Bal.(12-31-x3) 27,545
Carrying Amount (1-3-20x3) (482,455 ) Cumulative Bal.(12-31-x2) (27,545)
Gain on sale 12,545 Unrealized gain (loss) 0
5. = B.20,000
Solution:
Interest receivable(Semiannually)= 500K x 8% x 6/12 = 20,000
6. =D.143,500
Interest receivable
Jan. 1, 2003 38,000
Interest 152,000
143,500 Interest rev. (Squeeze)
46,500 Dec. 31, 2003
7. = D.9%; 4,208
Solution:
Trial and Error approach: 9%
(500K x PV of P1 @ 9%, n=3) + (50K x PV of ordinary annuity a 9%, n=3)=512,656
(500k x 0.772183) + (50K x 2.5312947) =512,656
386,092 + 126,565 = 512,656
512,656=512,656
(500K x 10%) - [(487,656 + 25,000 - 3,861) x 9%]= 50,000 - 45,792 = 4,208
3,861 -Premium Amortization on 20x1
8. D. 4,587 premium
9. C. 14,208 - OCI; 15,413 -Equity
10. A. (13,147)
11. A. 556,743; 203,735
12. B. 980,000
13. B. 952,334
14. D. 12%; 1,932,398
15. D. 2,944,112
16. A. (49,523) -Amortized cost; (49,523) - FVOCI
17. B. 16%; 5,624,483
18. C. 314,808
19. B.22,000
20. A. 2,096,073; 12%
Problem 5:
Activity 1
A. ₱1,000,000
B. ₱77,217 discount
C. Journal entry on july 1, 20x1
July 1, 20x1 Investment in bonds 922,783
Cash 922,783
D. 8%
E. 10%
F. Amortization table
Date Interest receive Interest income Amortization Present value
July 1,20x1 922,783
Jan. 1, 20x2 40,000 46,139 6,139 928,922
July 1, 20x2 40,000 46,446 6,446 935,368
Jan. 1, 20x3 40,000 46,768 6,786 942,136
July 1, 20x3 40,000 47,107 7,107 949,243
Jan. 1, 20x4 40,000 47,462 7,462 956,705
July 1, 20x4 40,000 47,835 7,835 964,540
Jan. 1, 20x5 40,000 48,227 8,227 972,767
July 1, 20x5 40,000 48,638 8,638 981,405
Jan. 1, 20x6 40,000 49,070 9,070 990,475
July 1, 20x6 40,000 49,524 9,524 999,999