Question

On July 1, 2018, HI Co. acquired investments in bonds of RAP Co.'s 10-year 12% bonds, with face value of P5,000,000, for P5,386,300. Interest is payable semi- annually on January 1 and July 1. The bonds mature on July 1, 2023. Bonds effective rate is 10%. On December 31, 2020, HI Corporation sold its debt instrument at 110. What amount of gain should HI Corporation recognize as a result of the disposal? * P144,385 P176,604 P210,434 P245,956 P283, 254 2 points

          On July 1, 2018, HI Co.
acquired investments in bonds
of RAP Co.'s 10-year 12%
bonds, with face value of
P5,000,000, for P5,386,300.
Interest is payable semi-
annually on January 1 and July
1. The bonds mature on July 1,
2023. Bonds effective rate is
10%. On December 31, 2020,
HI Corporation sold its debt
instrument at 110. What
amount of gain should HI
Corporation recognize as a
result of the disposal? *
P144,385
P176,604
P210,434
P245,956
P283, 254
2 points

On July 1, 2018, HI Co.
acquired investments in bonds
of RAP Co.'s 10-year 12%
bonds, with face value of
P5,000,000, for P5,386,300.
Interest is payable semi-
annually on January 1 and July
1. The bonds mature on July 1,
2023. Bonds effective rate is
10%. On December 31, 2020,
HI Corporation sold its debt
instrument at 110. What
amount of gain should HI
Corporation recognize as a
result of the disposal? *
P144,385
P176,604
P210,434
P245,956
P283, 254
2 points

Added by Alexander S.

Horngren’s Cost Accounting

Srikant M. Datar, Madhav V. Rajan 16th Edition

Instant Answer

Solved by Expert Keondre Parker

Step 1

The bond was purchased for P5,386,300, and the effective interest rate is 10%. This means that the bond's carrying value increases by 10% each year. From July 1, 2018, to December 31, 2020, there are 2.5 years. So, the carrying value of the bond on December Show more…

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On July 1, 2018, HI Co acquired investments in bonds of RAP Co.'s 10-year 12% bonds, with a face value of P5,000,000 for P5,386,300. Interest is payable semi-annually on January 1 and July 1. The bonds mature on July 1, 2023. The bonds' effective rate is 10%. On December 31, 2020, HI Corporation sold its debt instrument at 110. What amount of gain should HI Corporation recognize as a result of the disposal? P144,385 P176,604 P210,434 P245,956 P283,254