1. On January 1, 2020, BROKER Inc. acquired bonds of BDO Inc. The bonds are purchased for P3,100,000. BROKER Inc. incurred transaction costs totaling P49,211. The bonds have face value of P3,000,000 payable at the end of its three-year term. Interest of 12% is payable annually every December 31. The applicable effective rate of the bonds is 10%. On December 31, 2020, the bonds of BDO are traded in the exchange market at 110. On January 1, 2021, BROKER Inc. sold the bonds of BDO for 105 less disposal cost of P20,000. What is the interest income for the year ended December 31, 2020, if the business model of the entity is to sell the bonds to obtain short-term profit gain or loss?

a. P314,921

b. P310,000

c. P300,000

d. P360,000

2. Using the same data in number 1, what is the book value of the investment in bonds on December 31, 2020 if the business model of the entity is to collect contractual cash flows from principal and interest and to sell the bonds to obtain gain or loss on changes in fair value?

a. P3,104,132

b. P3,100,000

c. P3,300,000

d. P3,150,000

3. Using the same data in number , what is the realized gain (loss) on disposal on the investments on January 1, 2021 if the business model of the entity is to collect contractual cash flows from principal and interest?

a. P25,868 gain

b. (P170,000) loss

c. P10,789 gain

d. (P30,000) loss