CJ ALLAUIGAN

Entities invest
ü to maximize returns on idle cash
ü establish long-term relationship with suppliers and customers
ü to exercise significant influence or control over another entity (PAS 28)
ü to accumulate funds for future use
ü for capital appreciation (PAS 40)
ü for future protection
§ A financial instrument is any contract that gives rise to a financial asset of one entity
and a financial liability or equity instrument of another entity.

A financial asset is any asset that is:

a.cash;
b.an equity instrument of another entity;
c.a contractual right:
i.to receive cash or another financial asset from another entity; or
ii. to exchange financial assets or financial liabilities with another entity under conditions
that are potentially favorable to the entity; or
§ A financial instrument is any contract that gives rise to a financial asset of one entity
and a financial liability or equity instrument of another entity.

A financial asset is any asset that is:

d.a contract that will or may be settled in the entity’s own equity instruments and is:
i.a non-derivative for which the entity is or may be obliged to receive a variable number
of the entity’s own equity instruments; or
ii. a derivative that will or may be settled other than by the exchange of a fixed amount of
cash or another financial asset for a fixed number of the entity’s own equity instruments.
§ Financial Asset
1.Currency (cash) is a financial asset because it represents the medium of exchange and is
therefore the basis on which all transactions are measured and recognized in financial
statements.

2.A deposit of cash with a bank or similar financial institution is a financial asset because
it represents the contractual right of the depositor to obtain cash from the institution or to draw
a check or similar instrument against the balance in favor of a creditor in payment of a
financial liability.
§ Financial Asset

3.Common examples of financial assets representing a contractual right to receive cash in the
future and corresponding financial liabilities representing a contractual obligation to deliver
cash in the future are:
a.trade accounts receivable (payable);
b.notes receivable (payable);
c.loans receivable (payable); and
d.bonds receivable (payable).
§ Classification of Financial Assets

An entity shall classify financial assets as subsequently measured at amortized cost or fair
value based on
a.the entity’s business model for managing the financial assets and
b. the contractual cash flow characteristics of the financial asset.
§ Classification of Financial Assets

Financial Assets are measured at amortized cost if

a.The asset is held within a business model whose objective is to hold assets in order to
collect contractual cash flows.
b.The contractual terms of the financial asset give rise on specified dates to cash flows
that are solely payments of principal and interest on the principal amount outstanding.

A financial asset shall be measured at fair value unless it is measured at amortized

cost

The business model used is one with the objective of realizing cash flows through the sale
of the assets and managing the fair value changes.
 Classification of Financial Assets

at Amortized Cost at Fair Value

at Fair Value thru at Fair Value thru

Other Comprehensive Income Profit or Loss
 DEBT SECURITIES EQUITY SECURITIES
(debtor-creditor relationship (part ownership)

ASSET = LIABILITY + EQUITY

bonds (10 shares= 10people)
-interest -dividends
 DEBT SECURITIES
(debtor-creditor relationship

amortized costs

fair value thru profit or loss

fair value thru OCI

 DEBT SECURITIES Determine the acquisition price.
(debtor-creditor relationship o Price is expressed as a percentage of the face value.

e.g.
The 10%, P1.0 million face value bonds was acquired at 102.
(P1,000,000 X102%= P1,020,000)

The 10%, P1.0 milllion face value bonds was acquired at 95.
(P1,000,000 X 95%=P950,000
 DEBT SECURITIES Determine the acquisition price.
(debtor-creditor relationship o Price is expressed as a percentage of the face value.

e.g.
The 10%, P1.0 million face value bonds was acquired at 102.
(P1,000,000 X102%= P1,020,000)

The 10%, P1.0 milllion face value bonds was acquired at 95.
(P1,000,000 X 95%=P950,000

Which one is acquired (issued) at a premium?

discount?
 DEBT SECURITIES Determine the acquisition price.
(debtor-creditor relationship o Price is expressed as a percentage of the face value.

e.g.
The 10%, P1.0 million face value bonds was acquired at 102.
Premium (P1,000,000 X102%= P1,020,000)

Discount The 10%, P1.0 milllion face value bonds was acquired at 95.
(P1,000,000 X 95%=P950,000
 DEBT SECURITIES Determine the acquisition price.
(debtor-creditor relationship o Price is computed based on prevailing interest rate.

Determine purchase price for:

10%, P5,000,000 face value, five-year bonds dated June 30, 2020, for purchase on July 1, 2020, interest
payment dates are June 30 and December 31. Market rate of interestt on July 1, 2020 is 8%.

PRINCIPAL(FACE VALUE) 5,000,000

NOMINAL INTEREST RATE 10%
EFFECTIVE INTEREST RATE 8% 4%
TERMS 5 YRS n=10 times
INTEREST PAYMENT SEMI-ANNUAL
 DEBT SECURITIES Determine the acquisition price.
(debtor-creditor relationship o Price is computed based on prevailing interest rate.

Determine purchase price for:

10%, P5,000,000 face value, five-year bonds dated June 30, 2020, for purchase on July 1, 2020, interest
payment dates are June 30 and December 31. Market rate of interestt on July 1, 2020 is 8%.

Determine present value factor on year 5 for principal 0.6756

Determine present value of ordinary annuity for interest payments 8.1109
 DEBT SECURITIES Determine the acquisition price.
(debtor-creditor relationship o Price is computed based on prevailing interest rate.

Determine purchase price for:

10%, P5,000,000 face value, five-year bonds dated June 30, 2020, for purchase on July 1, 2020, interest
payment dates are June 30 and December 31. Market rate of interestt on July 1, 2020 is 8%.

Principal 5,000,000 x 0.6756=P3,378,000

Interest(5.0million x 10% x 6/12) 250,000 x 8.1109= 2,027,725
Purchase Price P 5,405,725
 DEBT SECURITIES Determine the acquisition price.
(debtor-creditor relationship o Price is computed based on prevailing interest rate.

Determine purchase price for:

6%, P10,000,000 face value, ten-year bonds dated June 30, 2020, for purchase on July 1, 2020, interest
payment date is June 30. Market rate of interestt on July 1, 2020 is 8%.

Determine present value factor on year 10 for principal 0.4632

Determine present value of ordinary annuity for interest payments 6.7101
 DEBT SECURITIES Determine the acquisition price.
(debtor-creditor relationship o Price is computed based on prevailing interest rate.

Determine purchase price for:

6%, P10,000,000 face value, ten-year bonds dated June 30, 2020, for purchase on July 1, 2020, interest
payment date is June 30. Market rate of interestt on July 1, 2020 is 8%.

Principal 10,000,000 x 0.4632=P4,632,000

Interest(10.0million x 6%) 600,000 x 6.7101= 4,026,060
Purchase Price P 8,658,060
 DEBT SECURITIES Determine the acquisition price.
(debtor-creditor relationship o Price is computed based on prevailing interest rate.

Principal Purchase Price

Bond A 5,000,000 5,405,725
Bond B 10,000,000 8,658,060

Which one is issued at a premium? discount?

 DEBT SECURITIES Determine the acquisition price.
(debtor-creditor relationship o Price is computed based on prevailing interest rate.

Principal Purchase Price Issued at

Bond A 5,000,000 5,001,180 Premium
Bond B 10,000,000 8,658,060 Discount

Which one is issued at a premium? discount?

 DEBT SECURITIES Determine the acquisition price.
(debtor-creditor relationship o Price is computed based on prevailing interest rate.

Principal Purchase Price Issued at Nominal Rate Effective Rate

Bond A 5,000,000 5,405,725 Premium 10% 8%
Bond B 10,000,000 8,658,060 Discount

Which one is issued at a premium? discount?

 DEBT SECURITIES Determine the acquisition price.
(debtor-creditor relationship o Price is computed based on prevailing interest rate.

Principal Purchase Price Issued at Nominal Rate Effective Rate

Bond A 5,000,000 5,405,725 Premium
Bond B 10,000,000 8,658,060 Discount 6% 8%

Which one is issued at a premium? discount?

 DEBT SECURITIES Determine the acquisition price.
(debtor-creditor relationship o Price is computed based on prevailing interest rate.

INTEREST REAL INTEREST

RECEIVED INCOME
Principal Purchase Price Issued at Nominal Rate Effective Rate
Bond A 5,000,000 5,405,725 Premium 10% 8%
Bond B 10,000,000 8,658,060 Discount 6% 8%
 DEBT SECURITIES
(debtor-creditor relationship
What if at the time of acquisition
amortized costs there are other transaction cost?

?
fair value thru profit or loss

fair value thru OCI

 DEBT SECURITIES amortized costs/thru OCI
(debtor-creditor relationship
Determine the acquisition price.
o Purchase price PLUS transaction cost

PURCHASE PRICE P3,691,500

ADD:TRANSACTION COST XX
TOTAL PURCHASE PRICE P XXX,XXX
 DEBT SECURITIES fair value thru profit or loss
(debtor-creditor relationship
Determine the acquisition price.

o Purchase price IGNORES transaction cost.

o Transaction cost is not capitalized but recognized as an
outright expense.

PURCHASE PRICE P3,691,500

TOTAL PURCHASE PRICE P XXX,XXX

TRANSACTION COST is recognized immediately in P/L.

 DEBT SECURITIES amortized c`osts
(debtor-creditor relationship
Determine the acquisition price.
o Purchase price (plus transaction cost if any)
PROBLEM 3-2

Interest Interest PREMIUM CARRYING

Date Received(15%) Income(14%) AMORTIZATION VALUE
1/1/Y1 8,274,646
12/31/Y1
12/31/Y2
12/31/Y3
12/31/Y4
12/31/Y5 8,000,000
 DEBT SECURITIES amortized costs
(debtor-creditor relationship
Determine the acquisition price.
o Purchase price (plus transaction cost if any)
PROBLEM 3-2

Interest Interest PREMIUM CARRYING

Date Received(15%) Income(14%) AMORTIZATION VALUE
1/1/Y1 8,274,646
12/31/Y1 DEDUCTED:
REDUCES CV,
12/31/Y2
REDUCES INTEREST
12/31/Y3 INCOME
12/31/Y4
12/31/Y5 8,000,000
 DEBT SECURITIES amortized costs
(debtor-creditor relationship
Determine the acquisition price.
o Purchase price (plus transaction cost if any)
PROBLEM 3-2

Interest Interest PREMIUM CARRYING

Date Received(15%) Income(14%) AMORTIZATION VALUE
1/1/Y1 8,274,646
12/31/Y1 1,200,000.00 1,158,450.44 41,549.56 8,233,096.44
12/31/Y2 1,200,000.00 1,152,633.50 47,366.50 8,185,729.94
12/31/Y3 1,200,000.00 1,146,002.19 53,997.81 8,131,732.13
12/31/Y4 1,200,000.00 1,138,442.50 61,557.50 8,070,174.63
12/31/Y5 1,200,000.00 1,129,825.37 70,174.63 8,000,000.00

interest received=PRT
interest received=P8.0M*15%*12/12
 DEBT SECURITIES amortized costs
(debtor-creditor relationship
Recognize interest
o received (receivable based on nominal rate.
PROBLEM 3-2 o income by thru amortization of premium (or discounts)

Cash 1,200,000
Interest Income 1,200,000

Interest Income 41,550

Debt investment at amortized cost 41,550
 DEBT SECURITIES amortized costs
(debtor-creditor relationship
Recognize interest
o received (receivable based on nominal rate.
PROBLEM 3-2 o income by thru amortization of premium (or discounts)

Cash 1,200,000
Interest Income 1,200,000

Interest Income 47,367

Debt investment at amortized cost 47,367
 DEBT SECURITIES at fair value thru profit or loss
(debtor-creditor relationship
Determine the acquisition price.
o Purchase price (transaction cost if any shall not be captalized
but recognized as outright expense)

PROBLEM 3-5
4/1 ON INTEREST DATE
PURCHASE PRICE (100 x P10,000 x101) 1,010,000

7/1 BETWEEN INTEREST DATES

PURCHASE PRICE (equal to face value) 150,000
ACCRUED INTEREST(P150,000x12%x4/12) 6,000
TOTAL PURCHASE PRICE 156,000
 DEBT SECURITIES at fair value thru profit or loss
(debtor-creditor relationship
Recognize interest
o received (receivable based on nominal rate.
PROBLEM 3-5
 DEBT SECURITIES at fair value thru profit or loss
(debtor-creditor relationship
Recognize increase (decrease) in FAIR VALUE in P/L
o no amortization of premium (or discounts)
PROBLEM 3-5 o Use unrealized gain or loss acount (recognized in profit or loss)
 DEBT SECURITIES at fair value thru OCI
(debtor-creditor relationship
Determine the acquisition price.
o Purchase price (plus transaction cost if any)

Interest Interest PREMIUM CARRYING

Date Received(12%) Income(10%) AMORTIZATION VALUE
1/1/Y1 1,063,394.00
12/31/Y1
12/31/Y2
12/31/Y3
12/31/Y3 1,000,000.00
 DEBT SECURITIES at fair value thru OCI
(debtor-creditor relationship
Determine the acquisition price.
o Purchase price (plus transaction cost if any)

Interest Interest PREMIUM CARRYING

Date Received(12%) Income(10%) AMORTIZATION VALUE
1/1/Y1 1,063,394.00
12/31/Y1 120,000.00 106,339.40 13,660.60 1,049,733.40
12/31/Y2 120,000.00 104,973.34 15,026.66 1,034,706.74
12/31/Y3 120,000.00 103,470.67 16,529.33 1,018,177.41
12/31/Y3 120,000.00 101,817.74 18,182.26 999,995.16
 DEBT SECURITIES at fair value thru OCI
(debtor-creditor relationship
Recognize interest
o received (receivable based on nominal rate.
o income by thru amortization of premium (or discounts)

Interest Interest PREMIUM CARRYING

Date Received(12%) Income(10%) AMORTIZATION VALUE
1/1/Y1 1,063,394.00
12/31/Y1 120,000.00 106,339.40 13,660.60 1,049,733.40
12/31/Y2 120,000.00 104,973.34 15,026.66 1,034,706.74
12/31/Y3 120,000.00 103,470.67 16,529.33 1,018,177.41
12/31/Y3 120,000.00 101,817.74 18,182.26 999,995.16
 DEBT SECURITIES at fair value thru OCI
(debtor-creditor relationship
Recognize increase (decrease) in FAIR VALUE in OCI
o use the title unrealized gain/loss recognized in OCI (equity)

Interest Interest YEAR 1

Received Income PREMIUM CARRYING Debt investment at FV-OCI 1,063,394
Date (12%) (10%) AMORTIZATION VALUE
Cash 1,063,394
1/1/Y1 1,063,394.00
Cash 120,000
12/31/Y1 120,000.00 106,339.40 13,660.60 1,049,733.40 Debt investment at FV-OCI 13,660.60
Interest Income 106,339.40
12/31/Y2 120,000.00 104,973.34 15,026.66 1,034,706.74

12/31/Y3 120,000.00 103,470.67 16,529.33 1,018,177.41

12/31/Y3 120,000.00 101,817.74 18,182.26 999,995.16

 DEBT SECURITIES at fair value thru OCI
(debtor-creditor relationship
Recognize increase (decrease) in FAIR VALUE in OCI
o use the title unrealized gain/loss recognized in OCI (equity)

Interest Interest YEAR 1

Received Income PREMIUM CARRYING Fair Value of the Debt Investment (P1Mx 108)1,080,000.00
Date (12%) (10%) AMORTIZATION VALUE Amortized cost 1,049,733.40
Unrealized gain-OCI (EQUITY) 30,266.60
1/1/Y1 1,063,394.00

12/31/Y1 120,000.00 106,339.40 13,660.60 1,049,733.40

12/31/Y2 120,000.00 104,973.34 15,026.66 1,034,706.74

FV Adj- Debt investment at FV-OCI 30,266.60
Unrealized gain on Debt
12/31/Y3 120,000.00 103,470.67 16,529.33 1,018,177.41 investment-OCI 30,266.60
12/31/Y3 120,000.00 101,817.74 18,182.26 999,995.16
 DEBT SECURITIES at fair value thru OCI
(debtor-creditor relationship
Recognize increase (decrease) in FAIR VALUE in OCI
o use the title unrealized gain/loss recognized in OCI (equity)

Interest Interest YEAR 2

Received Income PREMIUM CARRYING Cash 120,000
Date (12%) (10%) AMORTIZATION VALUE
Debt investment at FV-OCI 15,026.66
1/1/Y1 1,063,394.00 Interest Income 104,973.34

12/31/Y1 120,000.00 106,339.40 13,660.60 1,049,733.40

12/31/Y2 120,000.00 104,973.34 15,026.66 1,034,706.74

12/31/Y3 120,000.00 103,470.67 16,529.33 1,018,177.41

12/31/Y3 120,000.00 101,817.74 18,182.26 999,995.16

 DEBT SECURITIES at fair value thru OCI
(debtor-creditor relationship
Recognize increase (decrease) in FAIR VALUE in OCI
o use the title unrealized gain/loss recognized in OCI (equity)

Interest Interest YEAR 2

Received Income PREMIUM CARRYING
Fair Value of the Debt Investment (P1Mx 10)1,060,000.00
Date (12%) (10%) AMORTIZATION VALUE
Amortized cost 1,034,706.74
1/1/Y1 1,063,394.00 Unrealized gain-OCI (cumulative) 25,293.26

12/31/Y1 120,000.00 106,339.40 13,660.60 1,049,733.40

Unrealized gain on Debt
12/31/Y2 120,000.00 104,973.34 15,026.66 1,034,706.74 investment-OCI 4,973.34
FV Adj- Debt investment at FV-OCI 4,973.34
12/31/Y3 120,000.00 103,470.67 16,529.33 1,018,177.41
Unrealized gain on Debt
12/31/Y3 120,000.00 101,817.74 18,182.26 999,995.16 investment-OCI (Y1) P30,266.60
(Y2) 25,293.60
TOTAL UL-OCI P 4,973.34
 DEBT SECURITIES at fair value thru OCI
(debtor-creditor relationship
Recognize increase (decrease) in FAIR VALUE in OCI
o use the title unrealized gain/loss recognized in OCI (equity)

Interest Interest YEAR 3

Received Income PREMIUM CARRYING APRIL 1 SOLD 600,000 of bonds
Date (12%) (10%) AMORTIZATION VALUE

1/1/Y1 1,063,394.00 Entry for the remaining 400,000

Cash 48,000
12/31/Y1 120,000.00 106,339.40 13,660.60 1,049,733.40 Debt investment at FV-OCI 6,611,73
12/31/Y2 120,000.00 104,973.34 15,026.66 1,034,706.74 Interest Income 41,388.27

12/31/Y3 120,000.00 103,470.67 16,529.33 1,018,177.41

12/31/Y3 120,000.00 101,817.74 18,182.26 999,995.16

 DEBT SECURITIES at fair value thru OCI
(debtor-creditor relationship
Recognize increase (decrease) in FAIR VALUE in OCI
o use the title unrealized gain/loss recognized in OCI (equity)

Interest Interest YEAR 3

Received Income PREMIUM CARRYING
Fair Value of the Debt Investment (P400,000x 104) P416, 000.00
Date (12%) (10%) AMORTIZATION VALUE
Amortized cost (40% *CV Y3) 407,270.96
1/1/Y1 1,063,394.00 Unrealized loss-OCI-cumulative 8, 729.04

12/31/Y1 120,000.00 106,339.40 13,660.60 1,049,733.40

12/31/Y2 120,000.00 104,973.34 15,026.66 1,034,706.74

12/31/Y3 120,000.00 103,470.67 16,529.33 1,018,177.41

12/31/Y3 120,000.00 101,817.74 18,182.26 999,995.16

 Classification of Financial Assets

at Amortized Cost at Fair Value

-CA/NCA
-FV increases are ignored
-Discounts/Premiums are recognized
-Int Income =effective rate

at Fair Value thru at Fair Value thru

Other Comprehensive Income Profit or Loss
-CA/NCA -Current Asset
-FV adjustments are recognized -Ignores premiums/Discounts
-Disounts/Premiums are recognized -Int Income=nominal
-Int Income =effective rate
 3-11

1. B,C
2. A
3. B,C
4. A
5. B,C
6. B,C
7.A
8.A
9.B,C
10.B,C
11.C
12.C,B
13.A
14.A
15.B
 DEBT SECURITIES
(debtor-creditor relationship

Prepare all relevant journal entries.

DATE INT REC INT INC AMOR CV
12% 10% PREM June 1, 2020
6/1/20 5,353,150
Investment in Debt Sec-AC 5,353,150
Interest Income 250,000
12/31/20 350,000 312,267 37,733 5,315,417 Cash (5,353,100 + 5Mx12%x5/12) 5,603,150

12/31/21 600,000 531,542 68,458 5,246,959 Dec 31,2020

Cash 600,000
12/31/22 600,000 524,696 75,304 5,171,655 Interest Income 562,267
Investment in Debt Sec-AC 37,733
12/31/23 600,000 517,166 82,834 5,088,821
Dec 31,2021
12/31/24 600,000 511,179* *88,821 5,000,000 Cash 600,000
Interest Income 531,542
Investment in Debt Sec-AC 68,458
 DEBT SECURITIES
(debtor-creditor relationship

Prepare all relevant journal entries.

DATE INT REC INT INC AMOR CV
12% 10% PREM
6/1/20 5,353,150 Dec 31,2022
Cash 600,000
12/31/20 350,000 312,267 37,733 5,315,417 Interest Income 524,696
Investment in Debt Sec-AC 75,3043
12/31/21 600,000 531,542 68,458 5,246,959

12/31/22 600,000 524,696 75,304 5,171,655

12/31/23 600,000 517,166 82,834 5,088,821

12/31/24 600,000 511,179* *88,821 5,000,000

 DEBT SECURITIES
(debtor-creditor relationship

Prepare all relevant journal entries.

DATE INT REC INT INC AMOR CV
12% 10% PREM
6/1/20 5,353,150 Sept 1,2023 (3M)
Interest Receivable 240,000
12/31/20 350,000 312,267 37,733 5,315,417 Interest Income 206,866
Investment in Debt Sec-AC 33,134
12/31/21 600,000 531,542 68,458 5,246,959
CV OF BONDS 12/31/2022 3,102,993
12/31/22 600,000 524,696 75,304 5,171,655 AMORTIZATION OF PPREMIUM
(82,834 x 3/5) x 8/12 33,134
12/31/23 600,000 517,166 82,834 5,088,821 CV OF BONDS 9/1/2023 3,069,859

12/31/24 600,000 511,179* *88,821 5,000,000 *3Mx12%x8/12=240,000

 DEBT SECURITIES
(debtor-creditor relationship

Prepare all relevant journal entries.

DATE INT REC INT INC AMOR CV
12% 10% PREM
6/1/20 5,353,150 COMPUTING FOR 3M, AS 9/1/2023

12/31/20 350,000 312,267 37,733 5,315,417 INTEREST RECEIVABLE

600,000X(3M/5M)X(8/12) 240,000
12/31/21 600,000 531,542 68,458 5,246,959

12/31/22 600,000 524,696 75,304 5,171,655

INTEREST INCOME
12/31/23 600,000 517,166 82,834 5,088,821 517,166 X(3M/5M)X (8/12) 206,866

12/31/24 600,000 511,179* *88,821 5,000,000 AMORTIZATION OF PREMIUM 33,134

82,834 x(3M/5M)X(8/12)

Interest Receivable 240,000

Interest Income 206,866
Invest in DS-AC 33,134
 DEBT SECURITIES
(debtor-creditor relationship

Prepare all relevant journal entries.

DATE INT REC INT INC AMOR CV
12% 10% PREM
6/1/20 5,353,150 Sept 1,2023 (3M)
Cash 3,330,000
12/31/20 350,000 312,267 37,733 5,315,417 Investment in Debt Securities--AC 3,069,859
Gain on Sale on DS-AC 20,141
Interest Receivable 240,000
12/31/21 600,000 531,542 68,458 5,246,959
Proceeds
12/31/22 600,000 524,696 75,304 5,171,655 (3M x1.03) +240,000 3,330,000
CV OF BONDS 9/1/2023 -3,069,859*
12/31/23 600,000 517,166 82,834 5,088,821 Interest Receivable -240,000
Gain(Loss) on Sale 20,141
12/31/24 600,000 511,179* *88,821 5,000,000 *(5,171,655 x3m/5m) -33,134
 DEBT SECURITIES
(debtor-creditor relationship

Prepare all relevant journal entries.

DATE INT REC INT INC AMOR CV
12% 10% PREM
6/1/20 5,353,150 Dec 31,2023 (2M)
Cash 240,000
12/31/20 350,000 312,267 37,733 5,315,417 Interest Income 205,866
Investment in Debt Securities--AC 33,134
12/31/21 600,000 531,542 68,458 5,246,959

12/31/22 600,000 524,696 75,304 5,171,655

COMPUTING FOR 2M, AS 12/31/2023
12/31/23 600,000 517,166 82,834 5,088,821 INTEREST RECEIVABLE
600,000X(2M/5M) 240,000
12/31/24 600,000 511,179* *88,821 5,000,000
INTEREST INCOME
517,166 X(2M/5M) 205,866

AMORTIZATION OF PREMIUM 33,134

82,834 x(2M/5M)
 DEBT SECURITIES
(debtor-creditor relationship

Prepare all relevant journal entries.

DATE INT REC INT INC AMOR CV
12% 10% PREM
6/1/20 5,353,150 Dec 31,2024 (2M)
Cash 240,000
12/31/20 350,000 312,267 37,733 5,315,417 Interest Income 204,472
Investment in Debt Securities--AC 35,528
12/31/21 600,000 531,542 68,458 5,246,959

12/31/22 600,000 524,696 75,304 5,171,655

12/31/23 600,000 517,166 82,834 5,088,821

12/31/24 600,000 511,179* *88,821 5,000,000

 DEBT SECURITIES
(debtor-creditor relationship

Prepare all relevant journal entries.

Dec 31

Dec 31
 DEBT SECURITIES
(debtor-creditor relationship

Prepare all relevant journal entries.

Sept
 Prepare all relevant journal entries.

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. 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
 DEBT SECURITIES
(debtor-creditor relationship
Prepare all relevant journal entries.

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.
Interest Received Interest Discount
Dates Carrying Value
8% * Income10%** Amortization
A B C= I A-B I D=Prev CV+ C
6/1/Y1 3,691,500
12/1/Y1 160,000 184,575 24,575 3,716,075
6/1/Y2 160,000 185,804 25,804 3,741,879
12/1/Y2 160,000 187,094 27,094 3,768,973
6/1/Y3 160,000 188,449 28,449 3,797,421
12/1/Y3 160,000 189,871 29,871 3,827,292
6/1/Y4 160,000 191,365 31,365 3,858,657
12/1/Y4 160,000 192,933 32,933 3,891,590
6/1/Y5 160,000 194,579 34,579 3,926,169
12/1/Y5 160,000 196,308 36,308 3,962,478
6/1/Y6 160,000 197,522 37,522 4,000,000
*4,000,000*8%*6/12
**Previous CV*10%*6/12
 DEBT SECURITIES
(debtor-creditor relationship

Prepare all relevant journal entries.

Interest Interest
Discount Carrying YEAR 1
Dates Received Income
Amortization Value
(Rec) 8% 10% June 1 ,Y1
Debt investment at AC 3,691,500
Cash 3,691,500
6/1/Y1 3,691,500
12/1/Y1 160,000 184,575 24,575 3,716,075 Dec 1,Y1
6/1/Y2 160,000 185,804 25,804 3,741,879 Cash 160,000
Debt investment at AC 24,575
12/1/Y2 160,000 187,094 27,094 3,768,973 Interest Income 184,575
6/1/Y3 160,000 188,449 28,449 3,797,421
1/6 Dec 31,Y1
12/1/Y3 160,000 189,871 29,871 3,827,292 Interest Receivable 26,666.67
6/1/Y4 160,000 191,365 31,365 3,858,657 Debt investment at AC 4,300.67
Interest Income 30,967.34
12/1/Y4 160,000 192,933 32,933 3,891,590
6/1/Y5 160,000 194,579 34,579 3,926,169 Accrual of Interest for the month of December
12/1/Y5 160,000 196,308 36,308 3,962,478
6/1/Y6 160,000 197,522 37,522 4,000,000
 DEBT SECURITIES
(debtor-creditor relationship

Prepare all relevant journal entries.

Interest
Interest Income Discount Carrying YEAR 2
Dates Received
10% Amortization Value Jan 1,Y2
8% Interest Income 30,967.34
Interest Receivable 26,666.67
Debt investment at AC 4,300.67
6/1/Y1 3,691,500
June 1, Y2
12/1/Y1 160,000 184,575 24,575 3,716,075 Cash 160,000
6/1/Y2 160,000 185,804 25,804 3,741,879 Debt investment at AC 25,804
Interest Income 185,804
12/1/Y2 160,000 187,094 27,094 3,768,973
5/6 3,797,421 Dec 1,Y2
Cash 160,000
12/1/Y3 160,000 189,871 6/6 29,871 3,827,292 Debt investment at AC 27,094
6/1/Y4 160,000 191,365 1/6 31,365 3,858,657 Interest Income 187,094

12/1/Y4 160,000 192,933 32,933 3,891,590 1/6 Dec 31,Y2

6/1/Y5 160,000 194,579 34,579 3,926,169 Interest Receivable 26,666.67
Debt investment at AC 4,741.50
12/1/Y5 160,000 196,308 36,308 3,962,478 Interest Income 31,408.17
6/1/Y6 160,000 197,522 37,522 4,000,000 Accrual of Interest for the month of December
 DEBT SECURITIES
(debtor-creditor relationship

Prepare all relevant journal entries.

Interest Interest
Discount Carrying YEAR 4, NOVEMBER 1
Dates Received Income
Amortization Value Nov 1,Y4
8% 10%
Interest Receivable 133,333
Debt investment at AC 27,444
6/1/Y1 3,691,500 Interest Income 160,777
Accrual of Interest from 6/1 to 11/1,Y4
12/1/Y1 160,000 184,575 24,575 3,716,075
6/1/Y2 160,000 185,804 25,804 3,741,879
12/1/Y2 160,000 187,094 27,094 3,768,973
6/1/Y3 160,000 188,449 28,449 3,797,421
12/1/Y3 160,000 189,871 29,871 3,827,292
6/1/Y4 160,000 191,365 31,365 3,858,657
Proceeds from sale P3,925,000
12/1/Y4 160,000 192,933 32,933 3,891,590 Accrued interest (P4.0x8%x5/12) ( 133,333)
Proceeds from the sale of bonds P3,791,667
6/1/Y5 160,000 194,579 34,579 3,926,169
Carrying Value of the Bonds 11/1/Y4
12/1/Y5 160,000 196,308 36,308 3,962,478 (P3,858,657 +27,444) (3,886,101)
Loss on Sale (94,434)
6/1/Y6 160,000 197,522 37,522 4,000,000
 DEBT SECURITIES
(debtor-creditor relationship

Prepare all relevant journal entries.

YEAR 4, NOVEMBER 1
Nov 1,Y4
Interest Receivable 133,333
Debt investment at FV-OCI 27,444
Interest Income 160,777 Proceeds from sale P3,925,000
Accrual of Interest from 6/1 to 11/1,Y4 Accrued interest (P4.0x8%x5/12) ( 133,333)
Proceeds from the sale of bonds P3,791,667
Carrying Value of the Bonds 11/1/Y4
Nov 1,Y4 (P3,858,657 +27,444) (3,886,101)
Cash 3,925,000 Loss on Sale (94,434)
Loss on Sale of Investment 94,434
Debt investment at FV-OCI 3,886,101
InterestReceivable 133,333
Accrual of Interest from 6/1 to 11/1,Y4
 FVPL

Prepare all relevant journal entries.

YEAR 1
On June 1, Year 1, South Company purchased 4,000 of the P1,000 June 1 ,Y1
face value, 8% bonds of State Corporation for P3,691,500. The Debt investment at FVPL 3,691,500
bonds were purchased to yield 10% interest. Interest is payable Cash 3,691,500
semi-annually on December 1 and June 1.
Dec 1,Y1
The bonds mature on June 1, Year 5. On November 1, Year 4, Cash 160,000
Interest Income 160,000
South sold the bonds for P3,925,000. This amount includes the
appropriate accrued interest. Market Value of the bonds at the Dec 31,Y1
end of each reporting period follows: Interest Receivable 26,666.67
Interest Income 26,666.67
December 31, Year 1 97 Accrual of Interest for the month of December (4MX8%X1/12)

December 31, Year 2 99

DEC 31 ,Y1
December 31, Year 3 98 Debt investment at FVPL 188,500
Unrealized Gain on Debt Invt-FVPL 188,500

i=prt FVat Dec 31, Y1 P4.0x .97=P3,880,000

i=4,000,000(8%)(7/12) CV 3,691,500
Unrealized Gain 188,500
=186,666.67
 FVPL

Prepare all relevant journal entries.

YEAR 2
On June 1, Year 1, South Company purchased 4,000 of the P1,000 Jan 1,Y2 Interest Income 26,666.67
face value, 8% bonds of State Corporation for P3,691,500. The Interest Receivable 26,666.67
bonds were purchased to yield 10% interest. Interest is payable Accrual of Interest for the month of December

semi-annually on December 1 and June 1.

June 1,Y2 Cash 160,000
Interest Income 160,000
The bonds mature on June 1, Year 5. 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 Dec 1,Y2 Cash 160,000
end of each reporting period follows: Interest Income 160,000

December 31, Year 1 97 Dec 31,Y2Interest Receivable 26,666.67

December 31, Year 2 99 Interest Income 26,666.67
Accrual of Interest for the month of December
December 31, Year 3 98

i=prt
i=4,000,000(8%)(12/12)
i=320,000
 FVPL

Prepare all relevant journal entries.

YEAR 2
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
DEC 31 ,Y2
bonds were purchased to yield 10% interest. Interest is payable Debt investment at FVPL 80,000
semi-annually on December 1 and June 1. Unrealized Gain on Debt Invt-FVPL 80,000

The bonds mature on June 1, Year 5. On November 1, Year 4, FV at Dec 31, Y2 P4.0x .99=P3,960,000
South sold the bonds for P3,925,000. This amount includes the CV 3,880,000
appropriate accrued interest. Market Value of the bonds at the Unrealized Gain 80,000
end of each reporting period follows:

December 31, Year 1 97

December 31, Year 2 99
December 31, Year 3 98
 FVPL

Prepare all relevant journal entries.

YEAR 3
On June 1, Year 1, South Company purchased 4,000 of the P1,000 Jan 1,Y3 Interest Income 26,666.67
face value, 8% bonds of State Corporation for P3,691,500. The Interest Receivable 26,666.67
bonds were purchased to yield 10% interest. Interest is payable Accrual of Interest for the month of December

semi-annually on December 1 and June 1.

June 1,Y3 Cash 160,000
Interest Income 160,000
The bonds mature on June 1, Year 5. 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 Dec 1,Y3Cash 160,000
end of each reporting period follows: Interest Income 160,000

December 31, Year 1 97 Dec 31,Y3Interest Receivable 26,666.67

December 31, Year 2 99 Interest Income 26,666.67
Accrual of Interest for the month of December
December 31, Year 3 98

i=prt
i=4,000,000(8%)(12/12)
i=320,000
 FVPL

Prepare all relevant journal entries.

YEAR 3
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
DEC 31 ,Y3
bonds were purchased to yield 10% interest. Interest is payable Unrealized Loss on Debt Invt-FVPL 40,000
semi-annually on December 1 and June 1. Debt investment at FVPL 40,000

The bonds mature on June 1, Year 5. On November 1, Year 4, FV at Dec 31, Y3 P4.0x .98=P3,920,000
South sold the bonds for P3,925,000. This amount includes the CV,y2 3,960,000
appropriate accrued interest. Market Value of the bonds at the Unrealized Gain(Loss) ( 40,000)
end of each reporting period follows:

December 31, Year 1 97

December 31, Year 2 99
December 31, Year 3 98
 FVPL

Prepare all relevant journal entries.

YEAR 4 Sale
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 Nov 1,Y4
bonds were purchased to yield 10% interest. Interest is payable Interest Receivable 133,333
Interest Income 133,333
semi-annually on December 1 and June 1. Accrual of Interest from 6/1 to 11/1,Y4

The bonds mature on June 1, Year 5. On November 1, Year 4, Nov 1 ,Y4

South sold the bonds for P3,925,000. This amount includes the Cash 3,925,000
appropriate accrued interest. Market Value of the bonds at the Loss on Sale of Investment-FVPL 128,333
Debt investment at FVPL 3,920,000
end of each reporting period follows: Interest Receivable 133,333

December 31, Year 1 97 Proceeds from sale P3,925,000

December 31, Year 2 99 Accrued interest (P4.0x8%x5/12) ( 133,333)
December 31, Year 3 98 Proceeds from the sale of bonds P3,791,667
Carrying Value of the Bonds
12,31 Y3 FV (P4.0Mx 98) (3,920,000)
Loss on Sale (128,333)
interest earned i=prt
nov 1 dec 1 i=4,000,000(8%)(10/12)
june 1
sale date i=266,666.67
 FV-OCI

Prepare all relevant journal entries.

Interest Interest
Discount Carrying YEAR 1
Dates Received Income
Amortization Value
8% 10% June 1 ,Y1
Debt investment at OCI 3,691,500
Cash 3,691,500
6/1/Y1 3,691,500
12/1/Y1 160,000 184,575 24,575 3,716,075 Dec 1,Y1
6/1/Y2 160,000 185,804 25,804 3,741,879 Cash 160,000
Debt investment at OCI 24,575
12/1/Y2 160,000 187,094 27,094 3,768,973 Interest Income 184,575
6/1/Y3 160,000 188,449 28,449 3,797,421
1/6 Dec 31,Y1
12/1/Y3 160,000 189,871 29,871 3,827,292 Interest Receivable 26,666.67
6/1/Y4 160,000 191,365 31,365 3,858,657 Debt investment at OCI 4,300.67
Interest Income 30,967.3
12/1/Y4 160,000 192,933 32,933 3,891,590
6/1/Y5 160,000 194,579 34,579 3,926,169 Accrual of Interest for the month of December
12/1/Y5 160,000 196,308 36,308 3,962,478
12/31/Y1 CV=3,716,075 +4,300.67=P3,720,375.67
6/1/Y6 160,000 197,522 37,522 4,000,000
 FV-OCI

Prepare all relevant journal entries.

Interest Interest
Discount Carrying YEAR 1
Dates Received Income
Amortization Value
8% 10% Dec 31,Y1
Debt investment at OCI 159,624.33
Unrealized Loss/Gain-OCI 159,624.33
6/1/Y1 3,691,500
12/1/Y1 160,000 184,575 24,575 3,716,075
6/1/Y2 160,000 185,804 5 25,804 3,741,879
12/1/Y2 160,000 187,094 6 27,094 3,768,973
12/31/Y1FV (P4.Mx.97) 3,880,000.00
6/1/Y3 160,000 188,449 1 28,449 3,797,421 12/31/Y1 CV 3,720,375.67
12/1/Y3 160,000 189,871 29,871 3,827,292 Unrealized Gain-OCI 159,624.33
6/1/Y4 160,000 191,365 31,365 3,858,657
12/1/Y4 160,000 192,933 32,933 3,891,590
6/1/Y5 160,000 194,579 34,579 3,926,169
12/1/Y5 160,000 196,308 36,308 3,962,478
6/1/Y6 160,000 197,522 37,522 4,000,000
 FV-OCI

Prepare all relevant journal entries.

Interest Interest
Discount Carrying YEAR 2
Dates Received Income
Amortization Value Jan 1,Y2
8% 10% Interest Income 30,967.34
Interest Receivable 26,666.67
Debt investment at OCI 4,300.67
6/1/Y1 3,691,500
June 1, Y2
12/1/Y1 160,000 184,575 24,575 3,716,075 Cash 160,000
6/1/Y2 160,000 185,804 25,804 3,741,879 Debt investment at OCI 25,804
Interest Income 185,804
12/1/Y2 160,000 187,094 27,094 3,768,973
160,000 188,449 28,449 3,797,421 Dec 1,Y2
Cash 160,000
12/1/Y3 160,000 189,871 29,871 3,827,292 Debt investment at OCI 27,094
Interest Income 187,094
6/1/Y4 160,000 191,365 31,365 3,858,657
12/1/Y4 160,000 192,933 32,933 3,891,590 1/6 Dec 31,Y2
6/1/Y5 160,000 194,579 34,579 3,926,169 Interest Receivable 26,666.67
Debt investment at OCI 4,741.50
12/1/Y5 160,000 196,308 36,308 3,962,478 Interest Income 31,408.17
6/1/Y6 160,000 197,522 37,522 4,000,000 Accrual of Interest for the month of December
 FV-OCI (EQUITY)

Prepare all relevant journal entries.

Interest Interest
Discount Carrying YEAR 2
Dates Received Income
Amortization Value
8% 10% Dec 31,Y2
Debt investment at OCI 26,660.67
Unrealized Loss/Gain-OCI 26,660.67
6/1/Y1 3,691,500
12/1/Y1 160,000 184,575 24,575 3,716,075
6/1/Y2 160,000 185,804 25,804 3,741,879
12/1/Y2 160,000 187,094 27,094 3,768,973
160,000 188,449 28,449 3,797,421 Refer to the table:
12/1/Y2 CV 3,768,973.50
12/1/Y3 160,000 189,871 29,871 3,827,292 Disct Amortization for Dec 4,741.50
6/1/Y4 160,000 191,365 31,365 3,858,657 12/31/Y2 CV 3,773,715.00
12/1/Y4 160,000 192,933 32,933 3,891,590
12/31/Y2 FV (P4.0x99) 3,960,000.00
6/1/Y5 160,000 194,579 34,579 3,926,169 12/31/Y2 CV 3,773,715.00
Unrealized Gain-OCI Y2 186,285.00
12/1/Y5 160,000 196,308 36,308 3,962,478 Unrealized Gain-OCI Y1 (159,624.33)
6/1/Y6 160,000 197,522 37,522 4,000,000 Adjustment-OCI 26,660.67
 FV-OCI

Prepare all relevant journal entries.

YEAR 4, NOVEMBER 1
Nov 1,Y4
Interest Receivable 133,333 Proceeds from sale P3,925,000
Debt investment at FV-OCI 25,444 Accrued interest (P4.0x8%x5/12) ( 133,333)
Interest Income 160,777 Proceeds from the sale of bonds P3,791,667
Accrual of Interest from 6/1 to 11/1,Y4 Carrying Value of the Bonds
(P3,858,657 +27,444) (3,886,101)

Nov 1,Y4
Unrealized Loss/Gain-OCI 280,718 12/31/Y2
Cummulative UG-OCI Y2 186,284.00
Debt investment at FV-OCI 280,718
*Assume there has has not been any made adjustment in Y3

Update first the FV of the Investment:

FV on the Date of Sale=Process P3,791,667
CV on the date of sale 3,886,101
Cumulative Loss-OCI 94,434

Cummulative Gain 186,284.00

Cumulative Loss (94,434.00)
Adjustement 280,718
 DEBT SECURITIES
(debtor-creditor relationship

Prepare all relevant journal entries.

YEAR 4, NOVEMBER 1

Nov 1,Y4 Proceeds from sale P3,925,000

Cash 3,925,000 Accrued interest (P4.0x8%x5/12) ( 133,333)
Loss on Sale of Investment 94,434 Proceeds from the sale of bonds P3,791,667
Debt investment at FV-OCI 3,886,101 Carrying Value of the Bonds
(P3,858,657 +27,444) (3,886,101)
InterestReceivable 133,333 Loss on Sale (94,434)
Accrual of Interest from 6/1 to 11/1,Y4

Nov 1,Y4
Retained Earnings 94,434
Unrealized Loss on Sale of Investment-OCI 94,434
To close UG/UG-OCI to RE
 iIn Jan 2, 2020 Cordero Corporation issued P15,000,000 bonds that will mature in 10years. The management
decided to set up separate fund for the retirement of these bonds. The fund is to be placed in a separate
account to be maintained in the company’s depository bank.

In a board resolution, it was decided that the deposits of equal amount will be made every June 30 and
December 31, starting 2020. The company expects an average of 8% on tis investment.

How much should be the semi-annual deposits

to accumulate P15M?
15,000,000
8%=74.07
PRINCIPAL
925.93 1,000
8%=68.59 8%=74.07
PRINCIPAL
857.34 1,000
925.93
 8%=74.07
PRINCIPAL
925.93 1,000
8%=68.59 8%=74.07
PRINCIPAL
857.34 1,000
925.93

PRINCIPAL 8% 8% 8%
857.34 1,000
925.93
The Jan 2, 2020 Cordero Corporation issued P15,000,000 bonds that will mature in 10years. The management
decided to set up separate fund for the retirement of these bonds. The fund is to be placed in a separate
account to be maintained in the company’s depository bank.

In a board resolution, it was decided that the deposits of equal amount will be made every June 30 and
December 31, starting 2020. The company expects an average of 8% on tis investment.
How much should be the semi-annual deposits to accumulate P15M?

n= 10 yEars X 2= 20 times

interest= 8 annual %; 4% semi annual P15,000,000

future value

2.19112314293 -1 = Determine FV factor 29.77808

0.04
The Jan 2, 2020 Cordero Corporation issued P15,000,000 bonds that will mature in 10years. The management
decided to set up separate fund for the retirement of these bonds. The fund is to be placed in a separate
account to be maintained in the company’s depository bank.

In a board resolution, it was decided that the deposits of equal amount will be made every June 30 and
December 31, starting 2020. The company expects an average of 8% on tis investment.
How much should be the semi-annual deposits to accumulate P15M?

n= 10 eyars X 2= 20 times
interest= 8 annual %; 4% semi annual
P15,000,000
29.77808
=503,726
 PREV BALANCE ANNUAL DEPOSIT TOTAL INTEREST (8%) CUMULATIVE AMOUNT
A=Prev E balance B C=A+B D=C*8%*6/12 E=C+D

1 - 503,726.00 503,726.00 20,149.04 523,875.04

2 523,875.04 503,726.00 1,027,601.04 41,104.04 1,068,705.08
3 1,068,705.08 503,726.00 1,572,431.08 62,897.24 1,635,328.32
4 1,635,328.32 503,726.00 2,139,054.32 85,562.17 2,224,616.50
5 2,224,616.50 503,726.00 2,728,342.50 109,133.70 2,837,476.20
6 2,837,476.20 503,726.00 3,341,202.20 133,648.09 3,474,850.29
7 3,474,850.29 503,726.00 3,978,576.29 159,143.05 4,137,719.34
8 4,137,719.34 503,726.00 4,641,445.34 185,657.81 4,827,103.15
9 4,827,103.15 503,726.00 5,330,829.15 213,233.17 5,544,062.32
10 5,544,062.32 503,726.00 6,047,788.32 241,911.53 6,289,699.85
11 6,289,699.85 503,726.00 6,793,425.85 271,737.03 7,065,162.88
12 7,065,162.88 503,726.00 7,568,888.88 302,755.56 7,871,644.44
13 7,871,644.44 503,726.00 8,375,370.44 335,014.82 8,710,385.26
14 8,710,385.26 503,726.00 9,214,111.26 368,564.45 9,582,675.71
15 9,582,675.71 503,726.00 10,086,401.71 403,456.07 10,489,857.77
16 10,489,857.77 503,726.00 10,993,583.77 439,743.35 11,433,327.13
17 11,433,327.13 503,726.00 11,937,053.13 477,482.13 12,414,535.25
18 12,414,535.25 503,726.00 12,918,261.25 516,730.45 13,434,991.70
19 13,434,991.70 503,726.00 13,938,717.70 557,548.71 14,496,266.41
20 14,496,266.41 503,726.00 14,999,992.41 - 14,999,992.41
The Jan 2, 2020 Cordero Corporation issued P15,000,000 bonds that will mature in 10years. The management decided to set up
separate fund for the retirement of these bonds. The fund is to be placed in a separate account to be maintained in the company’s
depository bank.

In a board resolution, it was decided that the deposits of equal amount will be made every June 30 and December 31, starting
2020. The company expects an average of 8% on tis investment.

ANNUAL INTEREST CUMULATIVE

PREV BALANCE TOTAL
DEPOSIT (8%) AMOUNT
A=Prev E balance B C=A+B D=C*8%*6/12 E=C+D
1 - 503,726.00 503,726.00 20,149.04 523,875.04
2 523,875.04 503,726.00 1,027,601.04 41,104.04 1,068,705.08

June 30,2020
Bond Sinking Fund 503,726
Cash 503,726

Dec 31, 2020

Bond Sinking Fund 523,876.04
Interest Income 20,149.04 Interest from July 1-Dec 31
Cash 503,726.00
 PREV BALANCE ANNUAL DEPOSIT TOTAL INTEREST (8%) CUMULATIVE AMOUNT

A=Prev E balance B C=A+B D=C*8%*6/12 E=C+D

June 30,2020 - 503,726.00 503,726.00 20,149.04 523,875.04

Dec 31, 2020 523,875.04 503,726.00 1,027,601.04 41,104.04 1,068,705.08
June 30,2021 1,068,705.08 503,726.00 1,572,431.08 62,897.24 1,635,328.32
Dec 31, 2021 1,635,328.32 503,726.00 2,139,054.32 85,562.17 2,224,616.50
June 30,2022 2,224,616.50 503,726.00 2,728,342.50 109,133.70 2,837,476.20
Dec 31, 2022 2,837,476.20 503,726.00 3,341,202.20 133,648.09 3,474,850.29
7 3,474,850.29 503,726.00 3,978,576.29 159,143.05 4,137,719.34
8 4,137,719.34 503,726.00 4,641,445.34 185,657.81 4,827,103.15
9 4,827,103.15 503,726.00 5,330,829.15 213,233.17 5,544,062.32
10 5,544,062.32 503,726.00 6,047,788.32 241,911.53 6,289,699.85
 PREV ANNUAL INTEREST CUMULATIVE
TOTAL
BALANCE DEPOSIT (8%) AMOUNT
A=Prev E balance B C=A+B D=C*8%*6/12 E=C+D
June
11,433,327.13 503,726.00 11,937,053.13 477,482.13 12,414,535.25
30,2028
Dec 31,
12,414,535.25 503,726.00 12,918,261.25 516,730.45 13,434,991.70
2028
June
13,434,991.70 503,726.00 13,938,717.70 557,548.71 14,496,266.41
30,2029
Dec 31,
14,496,266.41 503,726.00 14,999,992.41 - 14,999,992.41
2029
On July 1, 2020 Dorina Company insured the life of its president for P4,000,000
paying an annual premium of P120,000. The company is the designatd
beneficiary of the insurance.

Surrender value of the insurance is as follows:

6/30/21 P0
6/30/22 P0
6/30/23 P36,000
6/30/24 P49,000
6/30/25 P62,000
The president died in March 31, 2025.
On July 1, 2020 Dorina Company inusred the life of its president for P4,000,000
paying an annual premium of P120,000. The company is the designatd
beneficiary of the insurance.
Prepaid Insurance

July 1, 2020 60,000

Prepaid Life Insurance 120,000
Cash 120,000

Dec 31, 2020

Life insurance expense 60,000 July-Dec= 6 months
Prepaid Life Insurance 60,000
On July 1, 2020 Dorina Company inusred the life of its president for P4,000,000
paying an annual premium of P120,000. The company is the designatd
beneficiary of the insurance.
Prepaid Insurance

July 1, 2021 60,000

Prepaid Life Insurance 120,000
Cash 120,000

Dec 31, 2021

Life insurance expense 120,000 Jan-Dec= 12 months
Prepaid Life Insurance 120,000
On July 1, 2020 Dorina Company inusred the life of its president for P4,000,000
paying an annual premium of P120,000. The company is the designatd
beneficiary of the insurance.
Prepaid Insurance

July 1, 2022 60,000

Prepaid Life Insurance 120,000
Cash 120,000

Dec 31, 2022

Life insurance expense 120,000
Prepaid Life Insurance 120,000
On July 1, 2020 Dorina Company inusred the life of its president for P4,000,000
paying an annual premium of P120,000. The company is the designatd beneficiary
of the insurance.

July 1, 2023
Prepaid Insurance
Prepaid Life Insurance 120,000
Cash 120,000
60,000
Dec 31, 2023
Life insurance expense 120,000
Prepaid Life Insurance 120,000

Recoverable from insurance company

Cash Surrender Value 36,000
Life insurance expense 36,000
On July 1, 2020 Dorina Company inusred the life of its president for P4,000,000
paying an annual premium of P120,000. The company is the designatd beneficiary
of the insurance.

July 1, 2024 Prepaid Insurance

Prepaid Life Insurance 120,000
Cash 120,000 60,000
Dec 31, 2024
Life insurance expense 120,000
Prepaid Life Insurance 120,000
Cash Surrender Value 13,000 record the INCREASE in surrender value
Life insurance expense 13,000
The president died on March 31,2025 Prepaid Insurance as of
January 1, 2025
60,0000
Mar 31 after death
Insurance Expense 30,000 30,0000
Prepaid Life Insurance 30,000 Updte the insurance expense up to time o
death

Mar 31, 2025

Receivable from Insurance Company 4,000,000
Cash surrender value 49,000
Prepaid Insurance 30,000
Gain on Insurance settlement 3,921,000
 MC14 DATE INT REC INT INC DISCT CV
OF 4%,SEMI-A 5%-SEMI-A AMOR
PAYMENTS

7/1/Y2 8,750,000
always check WHEN is the
acquistion 1/1/Y3 437,500
 DATE INT REC INT INC DISCT CV
OF 4%,SEMI-A 5%-SEMI-A AMOR

EXERCISES
PAYMENTS
7/1/Y2 3,692,000
1/1/Y3 160,000 184,600 24,600 3,716,600
7/1/Y3 160,000 185,830 25,830 3,742,630
MC 15 GIVEN:
PURCHASE DATE JULY 1, Y2
FACE VALUE 4,000,000
NOMINAL RATE 8%

PURCHASE PRICE 3,692,000

YIELD 10%

PAYMENT of interest Jan 1 & July 1

AMORTIZED COST
 MC17 DATE INT REC INT INC DISCT CV
OF 8% 10% AMOR
PAYMENTS

1/1Y2 912,400
always check WHEN is the
acquistion 1/1/Y3 80,000 91,240 11,240 923,640
 MC18 DATE INT REC INT INC DISCT CV
OF 4%,SEMI-A 5%-SEMI-A AMOR
PAYMENTS

6/1/Y1 7,383,000
always check WHEN is the
acquistion 12/1/Y1 320,000 369,150 49,150 7,432,150

6/1/Y2 320,000 371,607.50 51,607.50 7,483,757.50

SELLING PRICE WITH INTEREST 7,850,000.00

ACCRUED INTEREST ( 320,000.00)
SELLING PRICE FOR BONDS ONLY 7,530,000.00
CV 7,483,57.50
GAIN 46,242.50