Question

On January 1, Year 1, Grow Company purchased P 1,000,000, 12% bonds of Glow Company for P 1,063,394, a price that yields 10%. Interest on these bonds is payable every December 31. The bonds mature on December 31, Year 4. On April 1, Year 3, to pay a maturing obligation, Grow sold P 600,000 face value bonds at 101 plus accrued interest. Market value of the bonds on different dates is as follows: December 31, Year 1 108 December 31, Year 2 106 December 31, Year 3 104 Assume that the company intended to collect principal and interest over the term of the bonds and did not choose the fair value option, At what amount should the bond investments be shown on December 31, Year 2 statement of financial position? What amount of gain or loss should Grow recognize on the sale of investments in April 1, Year 3? What amount of interest income will be taken to profit or loss for the year ended December 31, Year 3?

          On January 1, Year 1, Grow Company purchased P 1,000,000, 12% bonds of Glow Company for P 1,063,394, a price that yields 10%. Interest on these bonds is payable every December 31. The bonds mature on December 31, Year 4. On April 1, Year 3, to pay a maturing obligation, Grow sold P 600,000 face value bonds at 101 plus accrued interest. Market value of the bonds on different dates is as follows:
December 31, Year 1                    108
December 31, Year 2                    106
December 31, Year 3                    104
Assume that the company intended to collect principal and interest over the term of the bonds and did not choose the fair value option,
At what amount should the bond investments be shown on December 31, Year 2 statement of financial position?
What amount of gain or loss should Grow recognize on the sale of investments in April 1, Year 3?
What amount of interest income will be taken to profit or loss for the year ended December 31, Year 3?

Added by Crystal P.

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