Question
On January 1, 2020, Sun Company purchased the debt instruments of Silk Company with a face value of P5,000,000 bearing interest rate of 8% for
On January 1, 2020, Sun Company purchased the debt instruments of Silk Company with a face value of P5,000,000 bearing interest rate of 8% for P4,621,006 to yield at 10% interest per year. The bonds mature on January 1, 2025 and pay interest annually on December 30.
On December 31, 2020, the fair value of the investment is P4,838,014, which is based on the prevailing market rate of 9%.
If the company's business model has the objective of trading and making a profit from changes in the fair value of the securities, what amount of unrealized trading gain or loss should the company disclose in its December 31, 2020 profit or loss?
If the company's business model has the objective of collecting all the contractual cash flows including interest and principal, at what amount should the investment be reported in the company's statement of financial position for the year ended December 31, 2020?
a.P4,683,107
b.P4,838,014
c.P4,751,418
d.P4,621,006
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