APIGO KYLE LAWRENCE ADIL
BSA 1st Year Section 7
Practice Solving b Prepare an amortization table if needed
3-1 Determine the purchase price of the ff.: Table of premium amortization
A. 10%, P5,000,000 face value, five-year bonds dated June 30, 2022, for purchase on July 1, Date Interest collected (IC) Interest earned (IE) Amortization (Amort.) Carrying value (CV)
2022; interest payment dates are June 30 and December 31. Jan 1, 2025 1,063,394.00
Dec 31, 2025 120,000.00 106,339.40 13,660.60 1,049,733.40
Discounted value of maturity value (P5,000,000*0.6756) 3,378,000.00 Dec 31, 2026 120,000.00 104,973.34 15,026.66 1,034,706.74
Discounted value of interest payments (P5,000,000*05%*8.1109) 2,027,725.00 Dec 31, 2027 120,000.00 103,470.67 16,529.33 1,018,177.41
Issue price/Purchase price of bonds 5,405,725.00 Dec 31, 2028 120,000.00 101,822.59 18,177.41 1,000,000.00
PV 1, 4%, 10 periods; PV Ord Ann, 4%, 10 periods 63,394.00
B. FV*SR CV*ER IC-IE CV
6%, P10,000,000, ten-year bonds, dated June 30, 2022, for purchase on July 1, 2022, -(Amort.-IE) Prev CV-FV Prev. CV-Amort.
interest payment date is June 30. FV
Questions
Discounted value of maturity value (P10,000,000*0.4632) 4,632,000.00 1 What is its carrying value on Dec. 31, 2025? 1,049,733.40
Discounted value of interest payments (P10,000,000*6%*6.7101) 4,026,060.00 2 How much interest income will be reported by Red Co. for the year 2025? 106,339.40
Issue price/Purchase price of bonds 8,658,060.00 3 How much interest income will be reported by Red Co. for the year 2026? 104,973.34
PV 1, 8%, 10 periods; PV Ord Ann, 8%, 10 periods
Assumption 2. The investments in debt securities are classified as at FVPL
Problem A On January 1, year 2025, RED Company purchased P1,000,000, 12% face value bonds for 2025 Debt investments - FVPL 1,063,394.00
P1,063,394 to yield 10% interest. Interest on the bonds is payable annually every Jan 1 Cash 1,063,394.00
December 31. The bonds will mature on December 31, 2028. The market value of the
bonds were as follows: December 31, 2025- 102: December 31, 2026-104 Dec 31 Cash 120,000.00
Interest revenue 120,000.00
Assumption 1. The investments in debt securities are classified as at AMORTIZED COST.
a Prepare the entries relating to the investment in debt securities for years 2025 and 2026 FV on investment, Dec 31, 2025 (P1,000,000*102%) 1,020,000.00
2025 Debt investments - amortized cost 1,063,394.00 less FV on investment, Jan 1, 2025 1,063,394.00
Jan 1 Cash 1,063,394.00 Increase (decrease) in value - 43,394.00
Dec 31 Cash 120,000.00 Unrealized gain/loss on debt investment - FVPL 43,394.00
Interest revenue 120,000.00 Debt investments - FVPL 43,394.00
Interest revenue 13,660.60 2026 Cash 120,000.00
Debt investments - amortized cost 13,660.60 Dec 31 Interest revenue 120,000.00
or
Dec 31 Cash 120,000.00 FV on investment, Dec 31, 2026 (P1,000,000*104%) 1,040,000.00
Interest revenue 106,339.40 less FV on investment, Dec 31, 2025 1,020,000.00
Debt investments - amortized cost 13,660.60 Increase (decrease) in value 20,000.00
2026 Cash 120,000.00 Debt investments - FVPL 20,000.00
Dec 31 Interest revenue 104,973.34 Unrealized gain/loss on debt investment - FVPL 20,000.00
Debt investments - amortized cost 15,026.66
Questions
1 What is its carrying value on Dec. 31, 2025? (P1,063,349-P43,394) 1,020,000.00
2 How much unrealized gain/loss will be reported by Red in its 2025
income statement? 43,394.00
3 How much unrealized gain/loss will be reported by Red as other
comprehensive income? -
4 How much interest income will be reported by Red Co. for the year 2025? 120,000.00
APIGO
BSA KYLE LAWRENCE ADIL
1st Year Section 7
APIGO KYLE LAWRENCE ADIL
BSA 1st Year Section 7
Assumption 3. The investments in debt securities are classified as at FVOCI b Prepare an amortization table if needed
2025 Debt investment - FVOCI 1,063,394.00 Table of discount amortization
Jan 1 Cash 1,063,394.00 Date Interest collected (IC) Interest earned (IE) Amortization (Amort.) Carrying value (CV)
Jan 1, 2025 912,400.00
Dec 31 Cash 120,000.00 Jul 1, 2025 40,000.00 45,620.00 - 5,620.00 918,020.00
Interest revenue 106,339.40 Jan 1, 2026 40,000.00 45,901.00 - 5,901.00 923,921.00
Debt investments - FVOCI 13,660.60 Jul 1, 2026 40,000.00 46,196.05 - 6,196.05 930,117.05
Jan 1, 2027 40,000.00 46,505.85 - 6,505.85 936,622.90
FV on investment, Dec 31, 2025 (P1,000,000*102%) 1,020,000.00 Jul 1, 2027 40,000.00 46,831.15 - 6,831.15 943,454.05
less CV of investment, Dec 31, 2025 1,049,733.40 Jan 1, 2028 40,000.00 47,172.70 - 7,172.70 950,626.75
Increase (decrease) in value - 29,733.40 Jul 1, 2028 40,000.00 47,531.34 - 7,531.34 958,158.09
Dec 31, 2028 40,000.00 47,907.90 - 7,907.90 966,065.99
Dec 31 Unrealized gain/loss on debt
investments - FVOCI 29,733.40 Jul 1 Cash 40,000.00
Debt investments - FVOCI 29,733.40 Debt investments - amortized cost 5,620.00
Interest income 45,620.00
2026 Cash 120,000.00
Dec 31 Interest revenue 104,973.34 Dec 31 Interest receivable 40,000.00
Debt investments - amortized cost 15,026.66 Debt investments - amortized cost 5,901.00
Interest income 45,901.00
FV on investment, Dec 31, 2026 (P1,000,000*104%) 1,040,000.00
less CV on investment, Dec 31, 2025 1,004,973.34 2026 Cash 40,000.00
Increase (decrease) in value 35,026.66 Jan 1 Interest receivable 40,000.00
Dec 31 Debt investments - FVOCI 35,026.66 Jul 1 Cash 40,000.00
Unrealized gain/loss on debt Debt investments - amortized cost 6,196.05
investments - FVOCI 35,026.66 Interest income 46,196.05
Questions Dec 31 Interest receivable 40,000.00
1 The investment in debt securities will be reported on Dec. 31, 2025 at Debt investments - amortized cost 6,505.85
what amount? (P1,063,394-P13,660.6-P29,733.4) 1,020,000.00 Interest income 46,505.85
2 How much unrealized gain/loss will be reported by Red
in its 2025 income statement? -
3 How much unrealized gain/loss will be reported by Red
as other comprehensive income? - 29,733.40
4 How much interest income will be reported by Red Co.
for the year 2025? 106,339.40
Problem B On January 1, year 2025, RED Company purchased P1,000,000, 8% face value bonds
for P912,400 to yield 10% interest. Interest on the bonds is payable semi-annually
every July 1 and Jan.1. The bonds will mature on December 31, 2028. The market value
of the bonds were as follows: December 31, 2025- 99: December 31, 2026-100
Assumption 1. The investments in debt securities are classified as at AMORTIZED COST.
a Prepare the entries relating to the investment in debt securities for years 2025 and 2026
2025 Debt investments - amortized cost 912,400.00
Jan 1 Cash 912,400.00
APIGO
BSA KYLE LAWRENCE ADIL
1st Year Section 7