On June 1, Year 1, South Company purchased 4,000 of the P1,000 face value, 8% bonds of State Corporation for P3,691,500. The bonds were purchased to yield 10% interest. Interest is payable semi-annually on December 1 and June 1. The bonds mature on June 1, Year 5. South uses the effective interest method of amortization. On November 1, Year 4, South sold the bonds for P3,925,000. This amount includes the appropriate accrued interest. Market value of the bonds at the end of each reporting period follows:

December 31, Year 1 97

December 31, Year 2 99

December 31, Year 3 98

Required:

(a) Prepare the entries in the books of South Year 1 and Year 2, including the adjustments at December 31, as a result of all the foregoing assuming that the securities are classified as

1. Debt investment at fair value through profit or loss

2. Debt investment at fair value through other comprehensive income

3. Debt investment at amortized cost

(b) Prepare the entry to record the sales of the securities on Year 4, assuming that the securities are classified as

1. Debt investment at fair value through profit or loss

2. Debt investment at fair value through other comprehensive income

3. Debt investment at amortized cost

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