INVESTMENT IN DEBT SECURITIES (BONDS)

INVESTMENT IN DEBT SECURITIES (BONDS) BEBOT Company holds debt securities within a business model whose objective is achieved both by collecting contractual cash flows and selling the debt securities. The contractual cash flows are solely payments of principal and interest on specified dates. A 3-year 5% P1,000,000 bond was purchased on December 31, 2014 and matures on December 31, 2017. The bonds were purchased to yield 7% interest. The following fair values of the bonds at end of the year are as follows: December 31, 2015 1,065,000 December 31, 2016 1,075,000 December 31, 2017 1,056,500 [Round-off Present Value Factors to FOUR decimal places) Required: (24 points) 1. Compute the carrying value of the financial assets as of: a. December 31, 2014 b. December 31, 2015. c. December 31, 2016. 2. Compute the interest income to be presented in the statement of comprehensive income for the following calendar year: a. 2015 b. 2016 c. 2017 3. Compute the cumulative balance of unrealized gain or loss to be presented as a component of equity in the statement of financial position as of the following period: a. December 31, 2015. b. December 31, 2016. c. December 31, 2017. 4. Assuming the bonds were sold on January 1, 2017 at P1,100,000, give the compound entry to record the sale. (3 points) 5. Assuming the bonds were sold on March 1, 2017 at P1,100,000 including any accrued interest, give the compound entry to record the sale. (3 points)