Assignment On Debt Investment

Problem 3-2
On June 1, year 1, South Company purchased 4,000 of the 1,000 face value, 8% bonds of State Corporation for 3,69
Interest is payable semi-annually on December 1 and June 1. The bonds mature on June 1, Year 5. On November 1,
includes the appropriate accrued interest. Market value of the bonds at the end of each reporting period follows:
December 31, Year 1 97

Debt Investment at Fair Value through Profit/Loss
June 1, Year 1
Debt Investment at FVPL
Cash
December 1, Year 1
Cash
Interest Revenue
4,000,000 x 8%x 6/12= 160,000
December 31, Year 1

Interest receivable
Interest Revenue
4,000,000 x 8% x 1/12= 26,667

Unrealized Gain/Loss on
June 1, Year 2
Cash
Interest Receivable
Interest revenue
December 1, Year 2
Cash
Interest Revenue
December 31, Year 2

Interest Receivable
Interest Revenue
4,000,000 x 8% x 1/12= 26,667
June 1, Year 3
Cash
Interest Receivable
Interest revenue
December 1, Year 3
Cash
Interest Revenue
December 31, Year 3

Interest Receivable
Interest revenue
June 1, Year 4
Cash
Interest Receivable
Interest Revenue
November 1, Year 4
Cash
Loss on Sale of Debt Investment
Interest Revenue
Debt Investment at Fair Value Through Other Comprehensive Income
June 1, Year 1
Debt Investment at FVOI
Cash
Date Nominal Interest Effective Interest Discount Amortization

0.04 0.05
June 1, Year 1
Dec 1, Year1 160,000 184,575.00 24,575.00
June 1, Year 2 160,000 185,803.75 25,803.75
Dec 1, Year 2 160,000 187,093.94 27,093.94
June 1, Year 3 160,000 188,448.63 28,448.63
Dec 1, Year 3 160,000 189,871.07 29,871.07
June 1, Year 4 160,000 191,364.62 31,364.62
Dec 1, Year 4 160,000 192,932.85 32,932.85
June 1, Year 5 160,000 51,589.86 108,410.14
Dec 1, Year1
Cash
Debt Investment at FVOCI
Interest Revenue
Dec 31, Year 1

Interest Receivable
Interest Revenue
160,000 x 1/6 = 26,667
25,803.75 x 1/6 = 4300.63
185,803.75 x 1/6 = 30,967. 29

Unrealized Gain/Loss at FVOCI
June 1, Year 2
Cash
Interest Receivable
Interest Revenue
Dec 1, Year 2
Cash
Interest Revenue
Dec 31, Year 2

Interest Receivable
Interest Revenue
160,000 x 1/6
28,448.63 x 1/6
188,448.63 x 1/6
June 1, Year 3
Cash
Interest Receivable
Interest Revenue
Dec 1, Year 3
Cash
Interest Revenue
Dec 31, Year 3

Interest Receivable
Interest Revenue
160,000 x 1/6
191,364.62 x 1/6
31,364.62 x 1/6

June 1, Year 4
Cash
Interest Receivable
Interest Revenue
Nov 1, Year 4
Cash
Loss on Sale of Debt Investment
Interest Revenue
Problem 3-12
On January 2, 2019, Cordero corporation issued 15,000,000 bonds that will mature on 10 years. The management d
The fund is to be placed in a separate account to be maintained in the company's depository bank.
In a board resolution, it was decided that deposits of equal amounts will be made every June 30 and December 31,
company expects to earn an average interest of 8%, net of tax, on this investment.
15,000,000/29.7781 503,726
Table for Accumulation of fund balance

Date Deposit Interest Balance,end
30-Jun-19 503,726 - 503,726.00
31-Dec-19 503,726 20,149.04 1,027,601.04
30-Jun-20 503,726 41,104.04 1,572,431.08
31-Dec-20 503,726 62,897.24 2,139,054.32
30-Jun-21 503,726 85,562.17 2,728,342.50
31-Dec-21 503,726 109,133.70 3,341,202.20
30-Jun-22 503,726 133,648.09 3,978,576.29
31-Dec-22 503,726 159,143.05 4,641,445.34
30-Jun-23 503,726 185,657.81 5,330,829.15
31-Dec-23 503,726 213,233.17 6,047,788.32
30-Jun-24 503,726 241,911.53 6,793,425.85
31-Dec-24 503,726 271,737.03 7,568,888.88
30-Jun-25 503,726 302,755.56 8,375,370.44
31-Dec-25 503,726 335,014.82 9,214,111.26
30-Jun-26 503,726 368,564.45 10,086,401.71
31-Dec-26 503,726 403,456.07 10,993,583.77
30-Jun-27 503,726 439,743.35 11,937,053.13
31-Dec-27 503,726 477,482.13 12,918,261.25
30-Jun-28 503,726 516,730.45 13,938,717.70
31-Dec-28 503,726 557,548.71 15,000,000.00
30-Jun-19
Bond Sinking Fund 503,726
Cash 503,726
31-Dec-19
Bond Sinking Fund 523,875.04
Cash 20,149.04
Interest Revenue 503,726
30-Jun-20
Cash
Interest revenue
31-Dec-20
Cash
Interest Revenue
30-Jun-21
Cash
Interest Revenue
31-Dec-21
Bonds Payable 612,859.70
Cash
Interest Revenue
nds of State Corporation for 3,691,500. The bonds were purchased to yield 10% interest.
June 1, Year 5. On November 1, Year 4, South sold the bonds for 3,925,000. This amount
each reporting period follows:
3,691,500
3,691,500
160,000
160,000
26,667
26,667
188,500 Fair Value (4,000,000 x 97%)

188,500 Carrying Amount
Increase in Market Value
160,000
26,667
133,333
160,000
160,000
26,667
26,667
80,000 Fair Value (4,000,000 x 99%)
80,000 Carrying Amount
Increase in Market Value
160,000
26,667
133,333
160,000
160,000
26,667
26,667
40,000 Fair Value (4,000,000 x 98%)

Carrying Amount
40,000 Decrease in Market Value
160,000
26,667
133,333
3,925,000 Selling Price

168,333 Accrued Interest (4,000,000 x 5/12 x 8%)
3,960,000 Total Cash received
133,333
Selling Price
Carrying Value
Loss on Sale
3,691,500
3,691,500
Carrying Value
3,691,500
3,716,075.00
3,741,878.75
3,768,972.69
3,797,421.32
3,827,292.39
3,858,657.01
3,891,589.86
4,000,000.00
160,000
24,575.00
184,575.00
26,667
4,301
30,967
Fair Value (97% x 4M)

163,925.00 Amortized Cost (in the table)
163,925.00 Unrealized Gain
160,000
21503
26,667
154,837
160,000
27,093.94
187,093.94
26,667
4,742
31,408
27,102.31
27,102.31 Fair Value (99% x 4M)
Amortized Cost (in the table)
Cum. Unrealized Gain
Less: Bal of Equity
160,000
23,708
26,667
157,041
160,000
29,871.07
189,871.07
26,667
5,228
31,894
65,605.30 Fair Value (98% x 4M)

65,605.30 Amortized Cost (in the table)
Cum. Unrealized Gain
Less: Bal of Equity
160,000
26,138
26,667
159,471
3,925,000
66,990 Selling Price
3,858,657 Accrued Interest (4,000,000 x 5/12 x 8%)
133,333 Total Cash received
Selling Price
Carrying Value
Loss on Sale
on 10 years. The management decided to set up a separate fund for retirement of this bonds.
depository bank.
every June 30 and December 31, starting June 30, 2019 through December 31, 2028. The
3,880,000
3,691,500
188,500
3,960,000
3,880,000
80,000
3,920,000
3,960,000
-40,000
3,791,667
000,000 x 5/12 x 8%) 133,333
3,925,000
3,791,667
3,960,000
168,333
3,880,000
3,716,075.00
163,925.00
3,960,000
3,768,972.69
191,027.31
163,925.00
27,102.31
3,920,000
3,827,292.39
92,707.61
27,102.31
65,605.30
3,791,667
000,000 x 5/12 x 8%) 133,333
3,925,000
3,791,667
3,858,657
66,990

Assignment On Debt Investment

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Problem 3-2

December 31, Year 1 97

Debt Investment at Fair Value through Profit/Loss

December 31, Year 1

Debt Investment at FVPL

December 31, Year 2

December 31, Year 3

Debt Investment at Fair Value Through Other Comprehensive Income

Date Nominal Interest Effective Interest Discount Amortization

Dec 31, Year 1

Debt Investment at FVOCI

Dec 31, Year 2

Dec 31, Year 3

Debt Investment at FVOCI

Table for Accumulation of fund balance

188,500 Fair Value (4,000,000 x 97%)

40,000 Fair Value (4,000,000 x 98%)

3,925,000 Selling Price

Fair Value (97% x 4M)

65,605.30 Fair Value (98% x 4M)

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