PROBLEM 5 The following data and information pertain to the audit of the sole "Investment in Debt Securities account of Princess Corporation for the year ended December 31, 2022: I. As per requested schedule, the client's accountant submitted the year-end fair value of this financial asset and other related figures

Face value Cost Fair value Yolo bonds 10% P5,000,000 P4,760,000* P5,100,000 * includes brokerage fees payment of P160,000. II. The financial asset is dated January 1, 2022 and matures on December 31, 2024 and pays interest annually on December 31 of each year with a 12% effective yield. III. The audit client has irrevocably elected the fair value option. However, the client's accountant inadvertently used a different business model to account its financial asset that is based on the collection of contractual cash flows through sole payments of principal and interest, and sale of the financial asset in the open market. As a result of your audit findings - 54. Assuming no correcting entries are made, the income statement for 2022 is: A. Understated by P268,800 B. Overstated by P160,000 C. Understated by P500,000 D. Overstated by P231,200 55. The amount of unrealized gain that should be reported as a component of other comprehensive income for 2022 is: A. P0 B. P500,000 C. P231,200 D. P268,800 56. The adjusting entry to correct the reclassification of the business model adopted by the entity would include: A. A credit to brokerage fees expense of P160,000 B. A debit to gain from change in fair value by P500,000 C. A credit to unrealized gain - OCI by P268,800 D. A debit to interest income by P71,200