PROBLEM 21-1

PREPARE A TABLE OF AMMORTIZATION USING AFFECTIVE INTEREST METHOD

Date Interest Received Interest Income Discount Ammortization

Jan-01-2021
Dec-31-2021 300,000 373,488 73,488
Dec-31-2022 300,000 379,367 79,367
Dec-21-2023 300,000 385,716 85,716
Dec-21-2024 300,000 392,829 92,892

COMPUTE THE UNREALIZED GAIN FOR 2021

12-31-2021 Fair Value 5,250,000
12-31-2021 Carrying Amount -4,742,088
2021 Unrealized Gain 507,912

COMPUTE THE UNREALIZED GAIN FOR 2022

Dec-31-2022 Fair Value 5,500,000
Dec-31-2022 Carrying Amount -4,821,455
Dec-31-2022 Cummulative Unrealized Gain 678,545
2021 Unrealized Gain -507,912
2022 Unrealized Gain 170,633

PREPARE JOURNAL ENTRIES

2021
01-Jan Financial Asset - FVOCI 4,668,600
Cash 4,668,600
Dec-31 Cash 300,000
Interest Income 300,000
Dec-31 Financial Asset - FVOCI 73,488
Interest Income 73,488
Dec-31 Financial Asset - FVOCI 507,912
Unrealized Gain - OCI 507,912
2022
Dec-31 Cash 300,000
Interest Income 300,000
Dec-31 Financial Asset - FVOCI 79,367
Interest Income 79,367
Dec-31 Financial Asset - FVOCI 170,633
Unrealized Gain - OCI 170,633
2023
Jan-22 Bond Investment 5,500,000
Financial Asset - FVOCI 5,500,000
Dec-31 Cash 300,000
Interest Income 300,000
Dec-31 Bond Investment - FVOCI 85,716
Interest Income 85,716
PROBLEM 21-2
PREPARE A TABLE OF AMMORTIZATION USING THE EFFECTIVE INTEREST METHOD

Date Interest Received Interest Income Discount Ammortization

Jan-01-2021
Dec-31-2021 160,000 190,000 30,000
Dec-31-2022 160,000 193,000 33,000
Dec-31-2023 160,000 123,000 37,000

COMPUTE UNREALIZED GAIN

12-31-2021 Fair Value 2,200,000
12-31-2021 Carrying Amount -1,930,000
2021 Unrealized Gain 270,000

12-31-2022 Fair Value 2,400,000

12-31-2022 Carrying Amount -1,963,000
2022 Cummulative Unrealized Gain 437,000

PREPARE JOURNAL ENTRIES

2021
01-Jan Bond Investment 1,900,000
Cash 1,900,000
Dec-31 Cash 160,000
Interest Income 160,000
Dec-31 Bond Investment 30,000
Interest Income 30,000
Dec-31 Financial Asset - FVOCI 270,000
Unrealized Gain - OCI 270,000
2022
01-Jan Financial Asset - FVOCI 2,200,000
Bond Investment 2,200,000
Dec-31 Cash 160,000
Interest Income 160,000
Dec-31 Financial Asset - FVOCI 33,000
Interest Income 33,000
Dec-31 Financial Asset - FVOCI 167,000
Unrealized Gain - OCI 167,000

PROBLEM 21-3

Date Interest Received Interest Income Discount Ammortization

Jan-01-2021
Dec-31-2021 300,000 272,400 -27,600
Dec-31-2022 300,000 270,192 -29,808
Dec-31-2023 300,000 267,807 -32,193
Dec-31-2024 300,000 265,232 -34,768
COMPUTE FOR THE LOSS ON RECLASSIFICATION
01-01-2023 Fair Value 2,845,000
01-01-2023 Carrying Amount -3,347,592
Loss on Reclassification -502,592

PREPARE JOURNAL ENTRIES

2021
Jan-01 Bond Investment 3,405,000
Cash 3,405,000
Dec-31 Cash 300,000
Interest Income 300,000
12-Dec Interest Income 27,600
Bond Investment 27,600
2022
Dec-31 Cash 300,000
Interest Income 300,000
Dec-31 Interest Income 29,808
Bond Investment 29,808
Dec-31 Loss on Reclassification 502,592
Financial Asset - FVPL 502,592
2023
01-Jan Financial Asset - FVPL 2,845,000
Bond Investment 2,845,000
Dec-31 Cash 300,000
Interest Income 300,000
Dec-31 Interest Income 32,193
Bond Investment 32,193

PROBLEM 21-4
WHAT AMOUNT SHOULD BE REPORTED AS INTEREST INCOME FOR 2021
Interest Income for 2021 (6,000,000x9) 540,000

WHAT AMOUNT OF UNREALIZED LOSS SHOULD BE RECOGNIZED IN THE INCOME STATEMENT FOR 2021
12-31-2021 Fair Value 5,450,000
12-31-2021 Carrying Amount -5,550,000
2022 Unrealized Loss 100,000

WHAT AMOUNT OF UNREALIZED GAIN SHOULD BE RECOGNIZED IN THE INCOME STATEMENT FOR 2022
12-31-2022 Fair Value 6,150,000
12-31-2021 Carrying Amount -5,450,000
2022 Unrealized Gain 700,000

PREPARE JOURNAL ENTRIES

2021
01-Jan Financial Asset - FVPL 5,550,000
Cash 5,550,000
Dec-31 Cash 540,000
 Interest Income 540,000
Dec-31 Unrealized Loss 100,000
Financial Asset - FVPL 100,000
2022
Dec-31 Cash 540,000
Interest Income 540,000
Dec-31 Financial Asset - FVPL 700,000
Unrealized Gain 700,000
2023
01-Jan Bond Investment 6,150,000
Financial Asset - FVPL 6,150,000
Dec-31 Cash 540,000
Interest Income 540,000
Dec-31 Interest Income 48,000
Bond Investment 48,000

PROBLEM 21-5
WHAT AMOUNT SHOULD BE REPORTED AS INTEREST INCOME FOR 2021
Interest Income for 2021 260,100 (4,335,000x6%)

WHAT AMOUNT OF UNREALIZED LOSS SHOULD BE RECOGNIZED IN OCI FOR 2021

01-01-2021 CA 4,335,000
Ammortization Cost
Interest Income 260,100
Interest Received -320,000 -59,900
12-31-2021 CA 4,275,100

12-31-2021 Fair Value 3,870,000

12-31-2021 CA -4,275,100
Unrealized loss in OCI for 2021 -405,100

WHAT AMOUNT SHOULD BE REPORTED AS INTEREST INCOME FOR 2022

Interest Income for 2022 320,000 (4,000,000x8%)

WHAT AMOUNT IS INCLUDED IN PROFIT OR LOSS IN 2022 AS A RESULT OF RECLASSIFICATION

12-31-2022 Fair Value 3,615,000
12-31-2021 Carrying Amount -3,870,000
Unrealized Loss in 2019 included in PNL -255,000
Reclassified from OCI to PNL -405,100
Profit or loss inluded In 2022 -660,100

PREPARE JOURNAL ENTRY

2021
01-Jan Financial Asset - FVOCI 4,335,000
Cash 4,335,000
Dec-31 Cash 320,000
Interest Income 320,000
 Dec-31 Interest Income 59,900
Financial Asset - FVOCI 59,900
Dec-31 Unrealized Loss - OCI 405,100
Financial Asset - FVOCI 405,100
2022
01-Jan Financial Asset - FVPL 3,870,000
Financial Asset - FVOCI 3,870,000
Dec-31 Unrealized Loss - PL 255,000
Financial Asset - FVOCI 255,000
Dec-31 Unrealized Loss - PL 405,100
Unrealized Loss - OCI 405,100

PROBLEM 21-6
WHAT AMOUNT SHOULD BE REPORTED AS INTEREST INCOME FOR 2021
Interest Income for 2021 240,000 (4,000,000x6%)

WHAT AMOUNT OF UNREALIZED LOSS SHOULD BE REPORTED IN THE INCOME STATEMENT FOR 2021

12-31-2021 Fair Value 3,490,000

12-31-2021 Carrying Amount -3,530,000
Unrealized loss included in PNL 2021 -40,000

WHAT AMOUNT OF UNREALIZED LOSS SHOULD BE RECOGNIZED IN OCI FOR 2022

01-01-2021 CA 3,490,000
Ammortization Cost 349,000
Interest Income(3,490,000x10%) -240,000 109,000
Interest Income(4,000,000x6%) 3,599,000

12-31-2021 Fair Value 3,425,000

12-31-2021 Carrying Amount -3,599,000
Unrealized Loss in OCI for 2022 -174,000

PREPARE JOURNAL ENTRIES

2021
01-Jan Financial Asset - FVPL 3,530,000
Cash 3,530,000
Dec-31 Cash 240,000
Interest Income 240,000
Dec-31 Unrealized Loss - PNL 40,000
Financial Asset - FVPL 40,000
2022
01-Jan Financial Asset - FVOCI 3,490,000
Financial Asset - FVPL 3,490,000
Dec-31 Cash 240,000
Interest Income 240,000
Dec-31 Financial Asset - FVOCI 109,000
Interest Income 109,000
Dec-31 Unrealized Loss - OCI 174,000
Financial Asset - FVOCI 174,000
Carrying Amount
4,668,600
4,742,088
4,821,455
4,907,171
5,000,000
Carrying Amount
1,900,000
1,930,000
1,963,000
2,000,000

Carrying Amount
3,405,000
3,377,400
3,347,592
3,315,399
3,280,631