P1. Investments Corporation purchased P500,000 8% bonds on January 1, 2014.

The bonds
were purchased to yield 10% interest. Interest is payable semiannually on June 30 and
December 31. The bonds mature on December 31, 2018.

On January 31, 2016, the business model of the company changed to realizing gains.

The market values of the bonds are as follows:

January 1, 2016 488,999
January 31, 2016 490,449
December 31, 2016 486,963
January 1, 2017 487,271
December 31, 2017 484,482

The company uses the calendar period. Round PV factors to two decimal places.
Required:
1. Interest income on 2016?
2. Carrying amount of the bonds on January 31, 2016?
3. Gain or loss on reclassification?
4. Gain or loss on December 31, 2016?
5. Gain or Loss on December 31, 2017?
The ff amortization schedule will be useful in computing for the requirements:

DATE EFFECTIVE NOMINAL AMORTIZATION CA

INTEREST INTEREST
1/1/14 459,400
6/30/14 22,970 20,000 2,970 462,370
12/31/14 23,118.5 20,000 3,118.5 471,488.5
6/30/15 23,574.425 20,000 3,574.425 475,062.925
12/31/15 23,753.14625 20,000 3,753.14625 478,816.0713
6/30/16 23,940.80356 20,000 3,940.80356 482,756.8749
12/31/16 24,137.84374 20,000 4,137.84374 486,894.7186

1. Interest on 6/30/16 23,940.80356

Interest on 12/31/16 24,137.84374
Interest Income 48,078.65000

2. CA on 12/31/15 478,816.0713
Amortization (3,940.80356 x 1/6) 656.8005
CA on 1/31/16 479,472.87

No reclassification yet on January 31, 2016. PRFS 9 defines reclassification date

as the first day of the reporting period following the change in business model,
which is January 1, 2017 (based on the problem), therefore the company will still
hold the investment through amortized cost until December 31, 2016.

3. CA on 12/31/16 486,894.7186
MV at 1/1/17 487,271.0000
Gain 376.28

PFRS 9, par 5.6.2 provides that when an entity reclassifies a financial asset at
Amortized Cost to financial asset at Fair Value, the fair value is determined at
reclassification date.

4. NIL / Zero

No reclassification on 2016, the bonds is still carried through Amortized Cost,

therefore no gain or loss.

5. CA on 1/1/17 487,271
MV at 12/31/17 484,482
Loss 2,789