Question
Lyka Company had the following bond investments held for trading during 2019. The fiscal period is the same as the calendar period. SMC-A bonds was
Lyka Company had the following bond investments held for trading during 2019. The fiscal
period is the same as the calendar period.
SMC-A bonds was purchased at face value of P100,000 last March 1, 2017, 4.82% per
annum interest, receiving quarterly interest every June 1, Sept 1, Dec 1 and Mar 1.
DD24 bonds was purchased at face value of P200,000 last July 1, 2017, 6.10% per
annum interest, receiving quarterly interest every Oct 31, Jan 31, April 30 and July 31.
Purchased on May 1, 2019 date of issuance of the SMPH-J bonds P100,000 face value
for 95.3, 6.22% per annum coupon interest rate. Interest is received semi-annually every
May 1 and Nov 1.
Sold all the SMC- A bonds for 101 plus accrued interest on November 1, 2019
On December 27, assuming the following are the quoted prices at year end based on
data at www.pds.com.ph
Coupon Rate Quoted Prices
Dec 31, 2018 Dec 31, 2019
SMC Series A 4.82% 99.133 101.00
DD24 RR22 6.10% 90.742 95.043
SMPH Series J 6.22% 97.88
Required:
a) Prepare journal entries to record all the transactions affecting the bond
investments. (Include the appropriate date and record the acquisition, interest
receipt, accrual of interest, etc.)
b) Present the investments on December 31, 2019.
2. Using the same information above, assume that SMPH-J bonds P100,000 face value for acquired
at 95.3, 6.22% per annum coupon interest rate and an effective rate of 8% is to be held as
financial asset at amortized cost. The date of issuance of the bonds is May 1, 2019 and mature
on May 1, 2022. Interest is received semi-annually every May 1 and Nov 1.
Required:
a) Prepare journal entries for 2019, 2020 and 2021 for the recording of interest and year end
required amortization if straight line method is used.
b) Prepare journal entries for 2019, 2020 and 2021 for the recording of interest and year end
required amortization if effective interest method is used.
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