CHAPTER 3

INVESTMENTS IN DEBT SECURITIES

AND OTHER NON-CURRENT FINANCIAL ASSETS

Discussion Question No. 15

15.1
15.2
15.3
15.4
15.5
PROBLEMS

3-1. (Abu Company)

(a)
Interest Premium
Date Received Interest Revenue Amortization Carrying Value
01/01/Y1 8,274,646
12/31/Y1 1,200,000 1,158,450 41,550 8,233,096
12/31/Y2 1,200,000 1,152,633 47,367 8,185,729
12/31/Y3 1,200,000 1,146,002 53,998 8,131,731
12/31/Y4 1,200,000 1,138,442 61,558 8,070,173
12/31/Y5 1,200,000 1,129,827* 70,173* 8,000,000
*rounded off.

(b)
Y1
Jan. 1 Debt Investments at Amortized Cost 8,274,646
Cash 8,274,646

Dec. 31 Cash 1,200,000

Debt Investments at Amortized Cost 41,550
Interest Revenue 1,158,450

Y2
Dec. 31 Cash 1,200,000
Debt Investments at Amortized Cost 47,367
Interest Revenue 1,152,633

3-2. (South Company)

(a)
(1) Securities are classified as at amortized cost

To facilitate computation, a partial amortization table is presented below.

Interest Interest Revenue Amortization
Date Received of Discount Amortized Cost
June 1, Year 1 3,691,500
Dec. 1, Year 1 160,000 184,575 24,575 3,716,075
June 1, Year 2 160,000 185,804 25,804 3,741,879
Dec. 1, Year 2 160,000 187,094 27,094 3,768,973
June 1, Year 3 160,000 188,449 28,449 3,797,422
Dec. 1, Year 3 160,000 189,871 29,871 3,827,293
June 1, Year 4 160,000 191,365 31,365 3,858,658
Dec. 1, Year 4 160,000 192,933 32,933 3,891,591

Year 1
June 1 Debt Investments at Amortized Cost 3,691,500
Chapter 3 – Investments in Debt Securities
and Other Non-current Financial Assets

Cash 3,691,500

Dec. 1 Cash 160,000

Debt Investments at Amortized Cost 24,575
Interest Revenue (see above table) 184,575

31 Interest Receivable 26,667

Debt Investments at Amortized Cost 4,301
Interest Revenue 30,968
160,000 x 1/6 = 26,667
25,804 x 1/6 = 4,301
Year 2
Jan. 1 Interest Revenue 30,968
Interest Receivable 26,667
Debt Investments at Amortized Cost 4,301

June 1 Cash 160,000

Debt Investments at Amortized Cost 25,804
Interest Revenue (see above table) 185,804

Dec. 1 Cash 160,000

Debt Investments at Amortized Cost 27,094
Interest Revenue (see above table) 187,094

31 Interest Receivable 26,667

Debt Investments at Amortized Cost 4,742
Interest Revenue 31,409
160,000 x 1/6 = 26,667
28,449 x 1/6= 4,742

(2) Securities are classified as at fair value through profit and loss.

Year 1
June 1 Debt Investments at FVPL 3,691,500
Cash 3,691,500

Dec. 1 Cash 160,000

Interest Revenue (4M x 8% x ½) 160,000

31 Interest Receivable 26,667

Interest Revenue (4M x 8% x 1/12) 26,667

31 Debt Investments at FVPL 188,500

Unrealized Gain on Debt Investments atFVPL 188,500
4M x .97 = 3,880,000
3,880,000 – 3,691,500 = 188,500

Year 2
Jan. 1 Interest Receivable 26,667
Interest Revenue 26,667

June 1 Cash 160,000

Interest Revenue 160,000

Dec. 1 Cash 160,000

Interest Revenue 160,000

31 Interest Receivable 26,667

Interest Revenue 26,667

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Chapter 3 – Investments in Debt Securities
and Other Non-current Financial Assets

Dec.31 Debt Investments at FVPL 80,000

Unrealized Gain on Debt Investments at
FVPL 80,000
4M x 0.99 = 3,960,000
3,960,000 – 3,880,000 = 80,000

(3) Securities are classified as at Fair Value Through Other Comprehensive Income

Year 1
June 1 Debt Investments at FV through OCI 3,691,500
Cash 3,691,500

Dec. 1 Cash 160,000

Debt Investments at Fair Value through OCI 24,575
Interest Revenue (see table) 184,575

Dec.31 Interest Receivable 26,667

Debt Investments at Fair Value through OCI 4,301
Interest Revenue 30,968

Dec. 31 Fair Value Adjustment – Debt Investments

at FV through OCI 159,624
Unrealized Gain on Debt Investments at
FVPL 159,624
Amortized cost
3,716,075 + 4,301 = 3,720,376
3,880,000 – 3,720,376 = 159,624

Year 2
Jan. 1 Interest Revenue 30,968
Interest Receivable 26,667
Debt Investments at FV through OCI 4,301

June 1 Cash 160,000

Debt Investments at Amortized Cost 25,804
Interest Revenue (see table) 185,804

Dec. 1 Cash 160,000

Debt Investments at Amortized Cost 27,094
Interest Revenue (see table) 187,094

31 Interest Receivable 26,667

Debt Investments at Amortized Cost 4,742
Interest Revenue 31,409
160,000 x 1/6 = 26,667
28,449 x 1/6= 4,742

31 Fair Value Adjustment – Debt Investments

at FV through OCI 26,661
Unrealized Gain on Debt Investments at
FVPL 26,661
Amortized cost
3,768,973 + 4,741 = 3,773,715
3,960,000 –3,773,715 =186,285
186,285 – 159,624 = 26,661

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Chapter 3 – Investments in Debt Securities
and Other Non-current Financial Assets

(b) Journal entry/entries to record sale of investment on November 1, Year 4.

(1) Securities are classified as at amortized cost.

Nov. 1 Debt Investments at Amortized Cost 27,444

Interest Receivable 133,333
Interest Revenue 192,933 x 5/6 160,777
32,933 x 5/6 = 27,444

1 Cash 3,925,000
Loss on Sale of Debt Investments at Amortized
Cost 94,435
Interest Receivable 133,333
Debt Investments at Amortized Cost 3,886,102

CV of Debt Investments sold:

As of June 1, Year 4 3,858,658
Amortization June 1 to
Nov. 1, Year 4 27,444
As of Nov. 1, Year 4 3,886,102
Sales price 3,791,667
Loss on sale 94,435

(2) Securities are classified as at fair value through profit or loss

Nov. 1 Cash 3,925,000

Loss on Sale of Debt Investments at FVPL 128,333
Interest Revenue 133,333
Debt Investments at FVPL 3,920,000
Acc. Int. = 4M x 8% x 5/12 = 133,333
Sales price (3,925,000–133,333) 3,791,667
Carrying value (4 M x 0.98) 3,920,000
Loss on sale 128,333

(3) Securities are classified as at Fair Value through Other Comprehensive Income

Nov. 1 Debt Investments at FV through OCI (32,933 x 5/6) 27,444

Interest Receivable 133,333
Interest Revenue (192,933 x 5/6) 160,777

1 Unrealized Gains/Losses on Debt Investments at

FV through OCI 280,720
Fair Value Adjustment – Debt Investments at
FV through OCI 280,720
3,858,658 + (32,933 x 5/6) = 3,886,102
3,886,102 – 3,791,667 = 94,435 decline
94,435 + 186,285 = 280,720

1 Cash 3,925,000
Fair Value Adjustment-Debt Investments at FV
through OCI 94,435
Interest Receivable 133,333
Debt Investments at FV through OCI 3,886,102

Retained Earnings 94,435

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Chapter 3 – Investments in Debt Securities
and Other Non-current Financial Assets

Unrealized Gain/Losses on Debt Investments

at FV through OCI 94,435

3-3. (Grow Company)

(1) Classified as at Amortized Cost

Amortization Table
Date Nom Int Effect Int Prem Amort Amortized cost, end
1/1/Year 1 1,063,394
12/31/Year 1 120,000 106,339 13,661 1,049,733
12/31/Year 2 120,000 104,973 15,027 1,034,706
12/31/Year 3 120,000 103,471 16,529 1,018,177

(a) Carrying value, 12/31/Year 2 (see table) P1,034,706

(b) Sales price P 606,000

Carrying value, 1/1/Year 3 (1,034,706 x 6/10 P620,824
Amortization 1/1/Year 3 – 4/1/Year 3
16,529 x 3/12 x 600/1000 (2,479) 618,345
Loss on sale P 12,345

(c) Interest income for Year 3:

Jan 1 to Mar 31 103,471 x 3/12 P 25,868
Apr 1 to Dec 31 103,471 x 400/1000 x 9/12 31,041
Total interest income for Year 3 P 56,909

(d) Carrying value, 12/31/Y3 (1,018,177 x 400/1000) P 407,271

(2) Classified as Debt Investments at FV through Profit or Loss

(a) Interest income (1,000,000 x 12%) P 120,000

(b) Sales price (600,000 x 1.01) P 606,000

Carrying value, 12/31/Year 2 (600,000 x 1.06) 636,000
Loss on sale P 30,000

(c) Carrying value, 12/31/Year 2 (FV) (1,000,000 x 1.06) P1,060,000

Carrying value, 12/31/Year 3 (400,000 x 1.04) P 416,000

(3) Classified as at Fair Value Through Other Comprehensive Income

(a) Carrying value, 12/31/Year 2 (1M x 1.06) P1,060,000

(1,034,760 + 25,240 FV Adj)

(b) Sales price P 606,000

Amortized cost 618,345
Loss on sale P 12,345

(c) Interest income for Year 3:

Jan 1 to Mar 31 103,471 x 3/12 P 25,868
Apr 1 to Dec 31 103,471 x 400/1000 x 9/12 31,041
Total interest income for Year 3 P 56,909

(d) Fair value, December 31, Year 3 (400,000 x 1.04) P 416,000

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Chapter 3 – Investments in Debt Securities
and Other Non-current Financial Assets

Amortized cost, December 31, Year 3

1,018,177 x 4/10 407,270
Cumulative amount of unrealized gains/loss P 8,730

3-4. (Powerpuff Company)

April 1 Debt Investments – FVPL – Peach Co. Bonds 1,010,000

Cash 1,010,000

July 1 Debt Investments – FVPL – Buttercup Bonds 150,000

Interest Receivable (150,000 x 12% x 4/12) 6,000
Cash 156,000

Oct. 1 Cash 50,000

Interest Income (1,000,000 x 10% x 6/12) 50,000

Dec. 31 Interest Receivable 34,000

Interest Income 34,000
1M x 10% x 3/12 = 25,000
150,000 x 12% x 6/12 = 9,000
25,000 + 9,000 = 34,000

31 Unrealized Loss on Investments at FVPL 17,000

Debt Investments – FVPL - Buttercup Bonds 3,000
Debt Investments – FVPL - Peach Bonds 20,000
Cost Fair value UGL
Peach 10% Bonds 1,010,000 990,000 (20,000)
Buttercup 12% Bonds 150,000 153,000 3,000
1,160,000 1,143,000 (17,000)

3-5. (Narito Company)

Amortization Table
Nominal Effective Premium Amortized Cost,
Date Interest Interest Amortization End
Jan. 1, Year 1 108,660
Dec. 31, Year 1 7,000 5,433 1,567 107,093
Dec. 31, Year 2 7,000 5,355 1,645 105,448
Dec. 31, Year 3 7,000 5,272 1,728 103,720
Dec. 31, Year 4 7,000 5,186 1,814 101,906
Dec. 31, Year 5 7,000 5,094 1,906 100,000

Year 1
Jan. 1 Debt Investments at Amortized Cost – Wolf Bonds 108,660
Cash 108,660

Dec. 31 Cash 7,000

Debt Investments at Amortized Cost – Wolf Bonds 1,567
Interest Income 5,433

Year 2
Dec. 31 Cash 7,000
Debt Investments at Amortized Cost – Wolf Bonds 1,645
Interest Income 5,355

Year 3
Dec. 31 Cash 7,000
Debt Investments at Amortized Cost – Wolf Bonds 1,728

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Chapter 3 – Investments in Debt Securities
and Other Non-current Financial Assets

Interest Income 5,272

Impairment Loss on Debt Investments 4,653

31
Debt Investments at Amortized Cost – Wolf Bonds 4,653
Carrying value, Dec. 31, Year 3 P103,720
Present value of future cash inflows
100,000 x 0.9070 90,700
4,500 x 1.8594 8,367 99,067
Impairment Loss P 4,653

Year 4
Dec. 31 Cash 4,500
Debt Investments at Amortized Cost – Wolf Bonds 453
Interest Income 4,953

Year 5
Dec. 31 Cash 4,500
Debt Investments at Amortized Cost – Wolf Bonds 480
Interest Income 4,980

Revised Amortization Table

Nominal Effective Discount Amortized Cost,
Date Interest Interest Amortization End
Dec. 31, Year 3 99,067
Dec. 31, Year 4 4,500 4,953 453 99,520
Dec. 31, Year 5 4,500 4,980* 480* 100,000

3-6. (Raffy Company)

To facilitate computation, a partial amortization table is presented below.

Interest Interest Revenue Amortization HTM
Date Received of Discount Carrying Value
June 1, 2018 5,353,150
Dec. 31, 2018 350,000 312,267 37,733 5,315,417
Dec. 31, 2019 600,000 531,542 68,458 5,246,959
Dec. 31, 2020 600,000 524,696 75,304 5,171,655
Dec. 31, 2021 600,000 517,166 82,834 5,088,821

2018
June 1 Debt Investments at Amortized Cost (Blessie) 5,353,150
Interest Revenue (5M x 12% x 5/12) 250,000
Cash 5,603,150

Dec. 31 Cash 600,000

Interest Revenue 562,267
Debt Investments at Amortized Cost (Blessie) 37,733

2019
Dec. 31 Cash 600,000
Interest Revenue 531,542
Debt Investments at Amortized Cost (Blessie) 68,458

2020
Dec. 31 Cash 600,000
Interest Revenue 524,696
Debt Investments at Amortized Cost (Blessie) 75,304

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Chapter 3 – Investments in Debt Securities
and Other Non-current Financial Assets

2021
Sept. 1 Interest Receivable (3M x 12% x 8/12) 240,000
Debt Investments at Amortized Cost (Blessie) 33,134
Interest Revenue (517,166 x 3/5 x 8/12) 206,866

1 Cash (3,090,000 + 240,000) 3,330,000

Gain on Sale of Debt Investments 20,141
Interest Receivable 240,000
Debt Investments at Amortized Cost (Blessie) 3,069,859

CV of debt investment sold:

As of 12/31/19 (5,171,655 x 3/5) 3,102,993
Amort from 1/1/20-9/1/20 33,134
CV as of 9/1/20 3,069,859
Sales price 3,090,000
Gain on sale 20,141

Dec. 31 Cash 240,000

Interest Revenue 206,866
Debt Investments at Amortized Cost (Blessie) 33,134
2M x 12% = 240,000
517,166 x 2/5 = 206,866
82,834 x 2/5 = 33,134

3-7. (Grow Company)

Amortization Table
Date Nom Int Effect Int Prem Amort Amortized cost, end
1/1/Year 1 1,063,394
12/31/Year 1 120,000 106,339 13,661 1,049,733
12/31/Year 2 120,000 104,973 15,027 1,034,706
12/31/Year 3 120,000 103,471 16,529 1,018,177

(a) Market value, 12/31/ Year 2 (1.06 x 1M) P1,060,000

Amortized cost, 12/31/Year 2 1,034,706
Unrealized Gain or Loss (In Equity) P 25,394

(b) Interest income for Year 2 P 104,973

(c) Market value, 12/31/Year 3 (1.04 x 400,000) P 416,000

Amortized cost (1,018,177 x 4/10) 407,271
Unrealized Gain on 12/31/Year 3 P 8,729

3-8. (Naruto Company)

Amortization Table
Nominal Premium Amortized Cost,
Date Interest Effective Interest Amortization End
Jan. 1, 2018 108,660
Dec. 31, 2018 7,000 5,433 1,567 107,093
Dec. 31, 2019 7,000 5,355 1,645 105,448
Dec. 31, 2020 7,000 5,272 1,728 103,720
Dec. 31, 2021 7,000 5,186 1,814 101,906
Dec. 31, 2022 7,000 5,094 1,906 100,000

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Chapter 3 – Investments in Debt Securities
and Other Non-current Financial Assets

(a) Interest income for 2018 P 5,433

(b) Carrying amount at December 31, 2019 (amortized cost) P105,448

(c)

2020
Dec. 31 Cash 7,000
Interest Revenue 5,272
Debt Investments at Amortized Cost 1,728

2021
May 31 Interest Receivable 2,917
Debt Investments at Amortized Cost 2,161
Interest Revenue 756
7,000 x 5/12 = 2,917
5,186 x 5/12 = 2,161
1,814 x 5/12 = 756

31 Cash (106,000 + 2,917) 108,917

Gain on Sale of Debt Investments 4,441
Interest Receivable 2,917
Debt Investments at Amortized cost 101,559
100,000 x 1.06 = 106,000
103,720 – 2,161 = 101,559
106,000 – 101,559 = 4,441

3-9. (Donna Corporation)

(a)
Amortization Table
Nominal Premium Amortized Cost,
Date Interest Effective Interest Amortization End
Jan. 2, Year 1 104,330
Dec. 31, Year 1 6,000 5,217 783 103,547
Dec. 31, Year 2 6,000 5,177 823 102,724
Dec. 31, Year 3 6,000 5,136 863 101,861
Dec. 31, Year 4 6,000 5,093 907 100,954
Dec. 31, Year 5 6,000 5,044 954* 100,000
*Adjusted, P4 difference is due to rounding off

(b) Present value of modified cash flow based on completed negotiation

Present value of new principal (90% x 100,000 = 90,000)
90,000 x 0.9070 81,630
Present value of reduced interest (6% x 90,000 = 5,400)
5,400 x 1.8594 10,041
Total 91,671

(c.1) Carrying value of bond investment, December 31, Year 3 101,861

Present value based on modified terms 91,671
Impairment loss 10,190

(c.2) Impairment Loss 10,190

Debt Investments at Fair Value Through OCI 10,190

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Chapter 3 – Investments in Debt Securities
and Other Non-current Financial Assets

PLEASE CHECK ANSWERS. As of December 31, Year 2, Unrealized Loss (debit balance)
and Fair Value Adjustment (credit balance) accounts have balance of P5,724 (102,724 –
97,000). SINCE THERE IS NO QUOTED PRICE AT DEC. 31, YEAR 3, I DID NOT HAVE
ANY ADJUSTMENT RELATED THERETO.

(d) Interest Income, Year 4 (see table below) P4,584

Interest Income, Year 5 (see table below) P4,542

Revised amortization table – New modified terms

Nominal Premium Amortized Cost,
Date Interest Effective Interest Amortization End
Dec. 31, Year 3 91,671
Dec. 31, Year 4 5,400 4,584 816 90,855
Dec. 31, Year 5 5,400 4,542 855* 90,000
*Adjusted; P2 difference is due to rounding off

3-10. Classification of Investments in Debt Securities

1. B and C 6. B and C 11. C

2. A 7. A 12. B and C
3. B and C 8. A 13. A
4. A 9. B and C 14. A
5. B and C 10. B and C 15. B

3-11. (Raymond Company)

1. Building Construction Fund Cash

Cash

2. Building Expansion Fund Securities

Building Expansion Fund Cash

3. Building Expansion Fund Securities

Interest Receivable – Building Expansion Fund
Building Expansion Fund Cash

4. Building Expansion Fund Cash

Dividend Income

5. Building Expansion Fund Expenses

Building Expansion Fund Cash

6. Building Expansion Fund Cash

Interest Receivable – Building Expansion Fund
Interest Income

7. Building Expansion Fund Securities

Building Expansion Fund Cash

8. Building Expansion Fund Cash

Building Expansion Fund Securities
Gain on Sale of Building Expansion Fund Securities
Interest Income

9. Building Expansion Fund Cash

Dividend Income

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Chapter 3 – Investments in Debt Securities
and Other Non-current Financial Assets

10. Building Expansion Fund Cash

Building Expansion Fund Securities
Gain on Sale of Building Expansion Fund Securities

11. Buildings
Building Expansion Fund Cash

12. Cash
Building Expansion Fund Cash

3-12. (Cordero Corporation)

(a) Required semiannual deposit

= P15,000,000/FV of ordinary annuity of 1 discounted at 4% for 20 periods
= P15,000,000 /29.7781 = P503,726

(b) 6/30/19
Bond Sinking Fund Cash 503,726
Cash 503,726
12/31/19
Bond Sinking Fund Cash 523,875
Cash 503,726
Interest Income (503,726 x 4%) 20,149

3-13. (Dorina Company)

(a) Entries for 2017 through 2022

7/01/17 Prepaid Life Insurance 120,000
Cash 120,000

12/31/17 Life Insurance Expense (120,000 X 6/12) 60,000

Prepaid Life Insurance 60,000

06/30/18 Prepaid Life Insurance 120,000

Cash 120,000

12/31/18 Life Insurance Expense 120,000

Prepaid Life Insurance 120,000

06/30/19 Prepaid Life Insurance 120,000

Cash 120,000

12/31/19 Life Insurance Expense 120,000

Prepaid Life Insurance 120,000

06/30/20 Prepaid Life Insurance 120,000

Cash 120,000

12/31/20 Life Insurance Expense 120,000

Prepaid Life Insurance 120,000

Cash Surrender Value* 36,000

Life Insurance Expense 36,000

06/30/21 Prepaid Life Insurance 120,000

Cash 120,000

12/31/21 Life Insurance Expense 120,000

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Chapter 3 – Investments in Debt Securities
and Other Non-current Financial Assets

Prepaid Life Insurance 120,000

Cash Surrender Value 13,000

Life Insurance Expense 13,000

03/31/22 Life Insurance Expense 30,000

Prepaid Life Insurance 30,000

Receivable from Insurance Company 4,000,000

Prepaid Life Insurance 30,000
Cash Surrender Value 49,000
Gain on Insurance Settlement 3,921,000

*The cash surrender value of life insurance may be recognized on the anniversary date
(June 30, 2020 and every June 30 thereafter). No proportionate adjustment, however, is
necessary at year-end because there is no actual increase in cash surrender between
anniversary dates.

(b) If the president or his heirs were the beneficiaries of the policy, the premiums paid shall be
charged to employees benefit expense and no cash surrender value will be set up by the company.
3-13. (Solidbank)

(a) P10,000,000 x 0.3220 = P3,220,000

(b) Interest Income in 2019 = 12% x P3,220,000 =P 386,400

(c) 1/1/19 Advances to Officers 3,220,000

Prepaid Compensation Expense 6,780,000
Cash 10,000,000

12/31/19 Advances to Officers 386,400

Interest Revenue 386,400

Compensation Expense 678,000

Prepaid Compensation Expense 678,000
6,780,000/10

12/31/20 Advances to Officers 432,768

Interest Revenue 432,768
(3,220,000 + 386,400) x 12%

Compensation Expense 678,000

Prepaid Compensation Expense 678,000

(d) Amortized Cost, December 31, 2020

3,220,000 + 386,400 + 432,768 = P4,039,168

MULTIPLE CHOICE QUESTIONS

Theory

MC1 MC6
MC2 MC7
MC3 MC8
MC4 MC9
MC5 MC10

Problems

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Chapter 3 – Investments in Debt Securities
and Other Non-current Financial Assets

MC11 A Purchase price is 1,000,000 x 1.04, or 1,040,000

Accrued interest is 1,000,000 x 12% x 4/12, or 40,000

MC12 C Interest income (8,750,000 x 5%) P437,500

MC13 C Investment cost, July 1, Year 2 P3,692,000

Nominal interest (4,000,000 x 4%) 160,000
Effective interest (3,692,000 x 5%) 184,600
Amortization of discount 24,600
Investment carrying value, December 31, Year 2 P3,716,600

MC14 C Interest income/Effective interest (3,692,000 x 5%) P184,600

MC15 B Investment cost P912,400

Amortization of discount (912,400 x 10%) – (1M x 8%) 11,240
Investment carrying value, December 31, Year 2 P923,640

MC16 D Total proceeds from sale of bonds P7,850,000

Accrued interest included (8.0M x .08 x 6/12) 320,000
Selling price P7,530,000
Carrying value of bond investment sold
Acquisition cost 7,383,000
Amortization, December 1, Year 1
Effective interest (7,383,000 x 5%) 369,150
Nominal interest (8.0M x 4%) 320,000 49,150
Carrying value, December 1, Year 1 7,432,150
Amortization, June 1, Year 2
Effective interest (7,432,150 x 5%) 371,608
Nominal interest 320,000 51,608 7,483,758
Gain on sale P 46,242

MC17 D Carrying amount is equal to FV P472,500

MC18 B Interest income is equal to nominal interest (500,000 x 4%) P20,000

MC19 D Sales price P460,000

Carrying amount of investment sold 472,500
Loss on sale P 12,500

MC20 A Annual insurance premium P110,000

Increase in cash surrender value during the year (115,000-80,00) 35,000
Life insurance expense for the year P75,000

MC21 C Present value of note, June 30, 2019 (2,000,000 x 0.7972) P1,594,400
Amortization of discount for 6 months (1,594,400 x 6%) 95,664
Carrying amount, December 31, 2019 P1,590,064

MC22 A Cash surrender value, January 1, 2019 P100,000

Annual premium paid, net of dividends earned
(200,000-20,000) 180,000
Life insurance expense reported 160,000
Increase in cash surrender value 20,000
Cash surrender value, December 31, 2019 P120,000

MC23 D Annual premium P40,000

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Chapter 3 – Investments in Debt Securities
and Other Non-current Financial Assets

Increase in cash surrender value (108,000 – 87,000) (21,000)

Dividend received (6,000)
Life insurance expense for 2019 P13,000

MC24 B Bond sinking fund, January 1 P2,250,000

Additional investments during the year 450,000
Dividend revenue 75,000
Interest revenue 150,000
Administration costs (25,000)
Bond sinking fund, December 31 P2,900,000

MC25 C Annual deposit (5,000,000/5.11) = 978,474 Rounded P 978,500

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