Investment in Bonds / Financial Assets at Amortized Cost

PROBLEM 1: On July 1, 2018, Cody Company paid P1,198,000 of 10%, 20-year bonds with a face amount
of P1,000,000. Interest is paid on June 30 and December 31. The bonds were purchased to yield 8%. The
effective interest method is used to recognized interest income from this long-term investment. What is
the carrying amount of the investment in bonds on December 31, 2018?

PROBLEM 2: On January 1, 2018, Purl Company purchased as a long-term investment P5,000,000 face
value of Shaw Company’s 8% bonds for P4,652,000. The bonds were purchased to yield 10% interest.
The bonds mature on January 1, 2023 and pay interest annually on December 31. The interest method
of amortization is used. What is the carrying amount of the investment in bonds on December 31, 2019?

PROBLEM 3: On July 1, 2018, York Company purchased as a long-term investment P1,000,000 of Park
Company’s 8% bonds for P946,000, including accrued interest. The bonds were purchased to yield 10%.
The bonds mature on January 1, 2024 and pay interest annually on January 1. York Company used the
effective interest method of amortization. What is the carrying amount of the investment in bonds on
December 31, 2018?

PROBLEM 4: On July 1, 2018, East Company purchased as a long-term investment P5,000,000 face
amount, 8% bonds of Rand Company for P4,651,000 to yield 10% per year. The bonds pay interest semi-
annually on January 1 and July 1. What is the carrying amount of the investment in bonds on December
31, 2018?

PROBLEM 5: On January 1,2 018, Russia Company purchased 5-year bonds with face amount of
P8,000,000 and stated interest of 10% per year payable semi-annually on June 30 and December 31.
What is the carrying amount of the investment in bonds on December 31, 2018?

PROBLEM 6: At the beginning of current year, Dean Company purchased ten-year bonds with a face
value of P1,000,000 and stated interest rate of 8% per year payable semi-annually June 30 and
December 31. What is the carrying amount of the investment in bonds on December 31, 2018?

PROBLEM 7: On January 1, 2018, Tagbilaran Company purchased bonds with face amount of
P2,000,000. The bonds are dated January 1, 2018 and mature on January 1, 2022. The interest on the
bonds is 10% payable semi-annually every June 30 and December 31. The prevailing market rate of
interest on the bonds is 12%. What is the carrying amount of the investment in bonds on December 31,
2018?

PROBLEM 8: On January 1,2 018, Arabian Company purchased serial bonds with face amount of
P3,000,000 and stated 12% interest payable annually every December 31. The bonds are to be held as
financial assets at amortized cost with 10% effective yield. The bonds mature at annual installment of
P1,000,000 every December 31. What is the present value of the serial bonds on January 1, 2018?