Use the following information for the next four questions: On Jan. 1, 20x1, Red Co. acquires P500,000 face amount, 10%, bonds of Ball Co. for P487,656. Red Co. incurred transaction costs equal to 5% of the face amount of the bonds. The bonds mature on Dec. 31, 20x3 and pay annual interest every Dec. 31. The bonds were quoted at 102 and 104 on Dec. 31, 20x1 and Dec. 31, 20x2, respectively. 7. What is the effective interest rate on the bonds and how much is the difference between the interest received and the interest income recognized in 20x2? a. 9%; 3,861 c. 14%; 5,389 d. 9%; 4,208 b. 11%; 6,392 8. How much is the unamortized bond discount or premium on Dec. 31, 20x2 if the bonds were measured at amortized cost? a. 4,587 discount c. 8,795 premium b. 5,129 discount d. 4,587 premium 9. What amounts of fair value gain (loss) is recognized in other comprehensive income (OCI) and in equity in 20x2 if the bonds were measured at FVOCI? Equity OCI Equity a. 15,413 14,208 c. 14,208 15,413 b. 17,899 32,410 d. 1,205 15,413 10. How much is the gain (loss) if half of the bonds were sold on July 1, 20x3 at 103, transaction costs of P7,000 were incurred on the sale, and the bonds were measured at amortized cost? a. (13,147) b. (78,123) c. (25,647) d. (6,541)