Esguerra Corp. reported an investment in financial asset at amortized cost based on the business model...
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Esguerra Corp. reported an investment in financial asset at amortized cost based on the business model with an objective of collecting contractual cash flows, amounting to P10,507,569 as of December 31, 2020, and an interest income for the year ended December 31, 2020, at P1,200,000. The three-year, 12% bonds, which were acquired on January 1, 2020, had a face value of 10M. The bonds were purchased at their prevailing interest rate of 10% and pays interest semi-annually every June 30 and December 31. Records reveal that the company accounted for the investment transaction as follows: 1/1/2020 Investment at amortized cost 10,507,569 Cash 6/30/2020 Cash 12/31/2020 Cash Date 1/1/20 6/30/20 12/31/20 To record acquisition of bonds. Interest income 6/30/21 12/31/21 6/30/22 12/31/22 To record receipt of interest. Interest income To record receipt of interest. Nominal (P*Nom rate) 60% of the investment was sold on December 31, 2020, at 110 prompting the company to shift from a business model of holding the securities primarily to collect contractual cash flow to a business model with an objective of holding the securities for short-term profit purposes (financial asset at amortized cost to financial asset at fair value through profit/losses). The company is yet to record the said disposal and shift of business model. Bonds were quoted at 115 by the end of 2021. 600,000 600,000 600,000 600,000 600,000 600,000 600,000 The applicable amortization schedule of any excess of acquisition cost over the investments' face value follows: Effective CV* Eff rate 600,000 525,378 521,647 517,730 513,616 509,297 504,762 Amortization 10,507,569 600,000 90,703 95,238 600,000 REQUIREMENTS: 1. What is the adjusted gain or loss on partial disposal of the investment in 2020? Balance 10,507,569 10,432,948 10,354,595 74,622 78,353 82,270 10,272,325 86,384 10,185,941 10,095,238 10,000,000 Esguerra Corp. reported an investment in financial asset at amortized cost based on the business model with an objective of collecting contractual cash flows, amounting to P10,507,569 as of December 31, 2020, and an interest income for the year ended December 31, 2020, at P1,200,000. The three-year, 12% bonds, which were acquired on January 1, 2020, had a face value of 10M. The bonds were purchased at their prevailing interest rate of 10% and pays interest semi-annually every June 30 and December 31. Records reveal that the company accounted for the investment transaction as follows: 1/1/2020 Investment at amortized cost 10,507,569 Cash 6/30/2020 Cash 12/31/2020 Cash Date 1/1/20 6/30/20 12/31/20 To record acquisition of bonds. Interest income 6/30/21 12/31/21 6/30/22 12/31/22 To record receipt of interest. Interest income To record receipt of interest. Nominal (P*Nom rate) 60% of the investment was sold on December 31, 2020, at 110 prompting the company to shift from a business model of holding the securities primarily to collect contractual cash flow to a business model with an objective of holding the securities for short-term profit purposes (financial asset at amortized cost to financial asset at fair value through profit/losses). The company is yet to record the said disposal and shift of business model. Bonds were quoted at 115 by the end of 2021. 600,000 600,000 600,000 600,000 600,000 600,000 600,000 The applicable amortization schedule of any excess of acquisition cost over the investments' face value follows: Effective CV* Eff rate 600,000 525,378 521,647 517,730 513,616 509,297 504,762 Amortization 10,507,569 600,000 90,703 95,238 600,000 REQUIREMENTS: 1. What is the adjusted gain or loss on partial disposal of the investment in 2020? Balance 10,507,569 10,432,948 10,354,595 74,622 78,353 82,270 10,272,325 86,384 10,185,941 10,095,238 10,000,000
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