On January 1, 2020, Genesis Company purchased P1,000,000 bonds at 97. The bonds mature on January...

 

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On January 1, 2020, Genesis Company purchased P1,000,000 bonds at 97. The bonds mature on January 1, 2030 and pay 10% annual interest beginning January 1, 2021. Commission paid on the acquisition amounted to P50,000. The business model of the entity is to sell such bonds in the near term to take advantage of the fluctuations in fair values for short-term profit taking. Accordingly, the bonds were classified as financial assets at fair value through profit or loss. The bonds were selling for 99 at the end of the year. 1. How much is the initial cost of the investment? 2. How much is the net amount to be recognized in profit or loss for the year? On January 1, 2020, Genesis Company purchased P1,000,000 bonds at 97. The bonds mature on January 1, 2030 and pay 10% annual interest beginning January 1, 2021. Commission paid on the acquisition amounted to P50,000. The business model of the entity is to sell such bonds in the near term to take advantage of the fluctuations in fair values for short-term profit taking. Accordingly, the bonds were classified as financial assets at fair value through profit or loss. The bonds were selling for 99 at the end of the year. 1. How much is the initial cost of the investment? 2. How much is the net amount to be recognized in profit or loss for the year?

Answer rating: 100% (QA)

1 Initial cost of the investment Face value of bonds purchased P1000000 Purchase price ... View the full answer