PROBLEM

Metrobank Inc. invested in different bonds securities from several companies during 2020. Metrobank intended to hold all these securities up to date of maturity. The following transactions occurred during 2020 - 2022 are provided by Metrobank concerning such investments:

a. On January 1, 2020, Metrobank acquired a serial bond from PAL Inc. The face value of the investment is P3,000,000 with annual installment of P1,000,000 every December 31. The nominal interest rate of 10% is payable annually every December 31. The yield rate of this bond is 12%.

b. On January 1, 2020, Metrobank acquired a term bond from UCPB Inc. The face value of the investment is P2,000,000 and will mature on December 31, 2022. The nominal interest rate is 10% per annum. The interest is payable semi-annually on July 1 and December 31. The yield rate of this bond is 8%.

c. On April 1, 2020, Metrobank acquired a term bond dated January 1, 2020 from RCBC Inc. The face value of the bond is P4,000,000. The investment will mature on December 31, 2023. The nominal interest rate is 10% per annum and the interest is payable annually on December 31. The yield rate of this loan is 12%.

d. On December 31, 2021, Metrobank sold the serial bond of PAL for P1,200,000.

e. On July 1, 2021, Metrobank sold the term bond of UCPB for P1,800,000.

f. On December 31, 2022, Metrobank sold the term bond of RCBC for P3,900,000.

REQUIRED:

1. Prepare the entry for the preceding transactions

2. Based on the result of your audit, determine the following:

I. Initial Measurement of Investment in PAL Bond

II. Initial Measurement of Investment in UCPB Bond

III. Initial Measurement of Investment in RCBC Bond

IV. Total Cash paid for acquisition of RCBC Bond

V. Interest Income from PAL Bond in 2020

VI. Interest Income from UCPB Bond in 2020

VII. Interest Income from RCBC Bond in 2020

VIII. Book value of PAL Bond on December 31, 2020

IX. Book value of UCPB Bond in December 31, 2020

X. Book value of RCBC Bond in December 31, 2020

XI. Gain or (loss) on sale of PAL Bond

XII. Gain or (loss) on sale of UCPB Bond

XIII. Gain or (loss) on sale of RCBC Bond