ORTEGA, ANGEL HEATHER C.
BA-153
ASSIGNMENT: CHAPTER 15-Financial Assets at Fair Value Through OCI
E 16-1. True or False
1. TRUE 6. FALSE11. FALSE 16. FALSE
2. FALSE 7. FALSE12. FALSE 17. TRUE
3. TRUE 8. TRUE 13. TRUE 18. TRUE
4. TRUE 9. FALSE14. FALSE 19. TRUE
5. FALSE 10. TRUE15. TRUE 20. TRUE
E 16-2. Accounting for debt investment
Amortization Schedule:
DATE E.I N.I D.A A.C
1-Jan-21 1,051,510
### 84, 121 100,000 -15,879 1,035,631
### 82, 850 100,000 -17,150 1,018,481
### 81,519 100,000 -18,481 1,000,000
Journal Entries:
To record acquisition on Jan. 1, 2021:
Debt Investment -FA at FVTOCI 1,051,510
Cash 1,051,510
To record the collection of interest on Dec. 31, 2021
Cash (1,000,000×10%) 100,000
Interest Income 100,000
To record amortization of discount on Dec. 31, 2021:
Interest Income 84,121
Debt Investment -FA at FVTOCI 84,121
To record the fair value adjustment on Dec. 31, 2021:
Fair value adjustment loss 18,021
Debt Investment -FA at FVTOCI 18,021
Fair value, Dec. 31, 2021 1,017,610
Less: CA before FV adjustment 1,035,631
FV gain (loss) -18,021
To record the collection of interest on Dec. 31, 2022 before the sale:
Cash (1,000,000×10%) 100,000
Interest Income 100,000
To record amortization of discount on Dec. 31, 2022 before the sale:
Interest Income 17,150
Debt Investment -FA at FVTOCI 17,150
To record the sale of investment on Jan. 1, 2022
Cash 1,017,610
Fair value adjustment loss 18,021
Debt Investment -FA at FVTOCI 999,589
MCP 16-1. Debt investment
1. B. 8.77%
2. B. 1,071,610
3. B. 33,900
4. B. 18,020
Solution:
PV Factor for 3 periods at 9% 2.5232
[(1-1.09^-3)/0.09]
PV of bond on Jan. 1, 2021 1,051,510
PV of bond on Dec. 31, 2021
(1,051,510 x 2.5232) 416,667
Interest Income (1,051,510 x 8.77%) 92,217
Effective Interest Rate 0.08769 or 8.77%
(92,217/1,051,510)
Cash Flow 9% rate Amount Present Value
PAR maturity value 0.8417 1,000,000 841,700
Interest 1.7591 100,000 175910
1,017,610
