Question
You were tasked to audit the Investment Account of EEE Corp. for the year ended 2021. After investigation, you determined the following facts: On January
You were tasked to audit the Investment Account of EEE Corp. for the year ended 2021. After investigation, you determined the following facts:
On January 1, 2019, EEE Corp. purchased P1,000,000, 10%, 5-year bonds which it properly classified as FA-AC. The bonds were purchased to yield 12%. Interest is payable every December 31. The bonds were quoted at 99 at the end of 2019.
1. How much FA-AC should be recognized at the year ended 2021?
2. Assuming that EEE recognized interest income based on the stated rate from the time it acquired the 5-year bonds, what amount should be credited to Retained Earnings as adjusting entry on 31 December 2021?
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