show complete solutions. This is a multiple choice question.

1. On January 1, 2019, Echo Co. acquired a 5-year bond investment with a Face Value of P5,000,000 for P5,379,079. The bonds carry an interest of 12% per year payable very December 31 and the bonds yield 10%. The company also incurred 30,000 transaction cost which was included in the total purchase price. The bonds are to be appropriately classified as held for trading. On December 31, 2019, the bonds are quoted at 104%. On November 1, 2020, the company changed business model. It was determined that the remaining investments should be reclassified at amortized cost. The bonds are quoted at 102% during this date. On December 31, 2020, the bonds are quoted at 103%. On January 1, 2021 the bonds are quoted at 103.5% How much is the gain or loss on reclassification? a. (P100,000) b. 25,000 C. 50,000 d. (25,000) 2. On January 1, 2019, Echo Co. acquired a 5-year bond investment with a Face Value of P5,000,000 for P5,379,079. The bonds carry an interest of 12% per year payable very December 31 and the bonds yield 10%. The company also incurred 30,000 transaction cost which was included in the total purchase price. The bonds are to be appropriately classified as held for trading. On December 31, 2019, the bonds are quoted at 104%. On November 1, 2020, the company changed business model. It was determined that the remaining investments should be reclassified at amortized cost. The bonds are quoted at 102% during this date. On December 31, 2020, the bonds are quoted at 103%. On January 1, 2021 the bonds are quoted at 103.5% How much is the interest income for 2019? a. P600,000 b. P537,908 C. P645,489 d. PO