On January 1, 2024, Oriole Inc. purchased an investment in Drexall Inc. bonds for $160,000, at par value. The bonds pay interest on December 31 each year. However, the company has determined that, due to a default on making interest and principal payments, there is objective evidence of impairment, which represents a triggering or loss event. The present value of the discounted revised cash flows is $128,400 using the original effective interest rate and $118,400 using the current market interest rate. The market value of the bonds is $108,400. Prepare the journal entries for impairment under ASPE and IFRS, respectively, assuming the company uses the amortized cost model.
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- On July 1, 2019, Aldrich Company purchased as an available-for-sale security 200,000 face value, 9% U.S. Treasury notes for 194,000. The notes mature July 1, 2020, and pay interest semiannually on January 1 and July 1. The notes were sold on December 1, 2019, for 199,000. Aldrich normally uses straight-line amortization on all of its notes. In its income statement for the year ended December 31, 2019, what amount should Aldrich report as a gain on the sale of the available-for-sale security? a. 2,500 b. 3,500 c. 5,000 d. 6,000On December 31, 2018, ABC Corp. acquired Garlic Corp.’s P1,000,000 notes for P927,880. The market interest rate at that time was 12%. The stated interest rate was 10%, payable annually. THe notes mature in five years and classifies as financial asset at amortized cost. At December 31, 2020, the note is considered credit-impaired. Management determined that it was probable that the issuer would pay back only P600,000 of the principal at maturity. At December 31,2021, because of the improvement in the credit rating of Garlic Corp., Sinait Corp. reassessed the collectibility of the note and now expects to collect P900,000 from Garlic Corp, at maturity date. The required loss allowance at December 31,2020 is Interest income to be recognized in 2021 profit or loss The impairment gain to be recognized in 2021 profit or loss isOn January 1, 2020, Aguilar Corporation purchased bonds with a face value of P4,000,000 for P3,649,600 in order to collect contractual cash flows that are solely payments of principal and interest. The bonds are purchased to yield 10% interest. The nominal interest rate on the bonds is 8% payable annually every December 31. On December 31, 2021, as a result of a change in the business model for managing financial assets, the entity decided to reclassify the bonds from amortized cost to fair value. On that date, the carrying amount of the bond investment is P3,744,016 after discount amortization using the effective interest method. The market value of the bonds on January 1, 2015, is 10%. Requirements: Prepare the necessary journal entries to record the Using the same information, except that the change is from fair value to amortized cost, prepare the necessary journal entries to record the What if, initially, the investment is classified at FVTPL, then subsequently changed it to…
- Feherty, Inc., accounts for its investments under IFRS No. 9 and purchased the following investments during December 2021: Two hundred of Donald Company’s $1,000 bonds. The bonds pay semiannual interest, return principal in 12 years, and include no other cash flows or other features. Feherty plans to hold 80 of the bonds to collect contractual cash flows over the life of the investment and to hold 120, both to collect contractual cash flows but also to sell them if their price appreciates sufficiently. Subsequent to Feherty’s purchase of the bonds, but prior to December 31, the fair value of the bonds increased to $1,030 per bond, and Feherty sold 80 of the 120 bonds. Feherty also sold 20 of the 80 bonds it had planned to hold to collect contractual cash flows over the life of the investment. The fair value of the bonds remained at $1,030 as of December 31, 2021. $26,500 of Watson Company common stock. Feherty does not have the ability to significantly influence the operations of…On January 1, 2020, Aguilar Corporation purchased bonds with a face value of P4,000,000 forP3,649,600 in order to collect contractual cash flows that are solely payments of principal and interest.The bonds are purchased to yield 10% interest. The nominal interest rate on the bonds is 8% payableannually every December 31.On December 31, 2021, as a result of a change in the business model for managing financial assets,the entity decided to reclassify the bonds from amortized cost to fair value. On that date, the carryingamount of the bond investment is P3,744,016 after discount amortization using the effective interestmethod. The market value of the bonds on January 1, 2015, is 10%. Requirements: 1. Preparethe necessary journal entries to record the transactions using the change is from fair value to amortized cost.On January 1, 2020, Aguilar Corporation purchased bonds with a face value of P4,000,000 forP3,649,600 in order to collect contractual cash flows that are solely payments of principal and interest.The bonds are purchased to yield 10% interest. The nominal interest rate on the bonds is 8% payableannually every December 31.On December 31, 2021, as a result of a change in the business model for managing financial assets,the entity decided to reclassify the bonds from amortized cost to fair value. On that date, the carryingamount of the bond investment is P3,744,016 after discount amortization using the effective interestmethod. The market value of the bonds on January 1, 2015, is 10%. Requirements: 1. What if, initially, the investment is classified at FVTPL, then subsequently changed it to FVTOCI, prepare the necessary journal entries to record the transactions. Assume that the bond is for 5 years on the date of acquisition.
- Feherty, Incorporated accounts for its investments under IFRS No. 9 and purchased the following investments during December 2024: Eighty of Donald Company’s $1,000 bonds. The bonds pay semiannual interest, return principal in 10 years, and include no other cash flows or other features. Feherty plans to hold 20 of the bonds to collect contractual cash flows over the life of the investment and to hold 60, both to collect contractual cash flows but also to sell them if their price appreciates sufficiently. Subsequent to Feherty’s purchase of the bonds, but prior to December 31, the fair value of the bonds increased to $1,020 per bond, and Feherty sold 20 of the 60 bonds. Feherty also sold 10 of the 20 bonds it had planned to hold to collect contractual cash flows over the life of the investment. The fair value of the bonds remained at $1,020 as of December 31, 2024. $25,300 of Watson Company common stock. Feherty does not have the ability to significantly influence the operations of…Current Attempt in Progress On January 1, 2024, Blossom Inc. purchased an investment in Drexall Inc. bonds for $167,000, at par value. The bonds pay interest on December 31 each year. However, the company has determined that, due to a default on making interest and principal payments, there is objective evidence of impairment, which represents a triggering or loss event. The present value of the discounted revised cash flows is $116,100 using the original effective interest rate and $106,100 using the current market interest rate. The market value of the bonds is $96,100. Prepare the journal entries for impairment under ASPE and IFRS, respectively, assuming the company uses the amortized cost model. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. List all debit entries before credit entries.) Account Titles ASPE IFRS eTextbook and Media List…On January 1,2021, XYZ Corporation purchased a land for P 15,000,000. In exchange of the land, ABC issued a non-interest bearing note which is due on December 31,2025. There is no readily available market value for the building, but the current market rate of interest for comparable notes is 15% How much should be presented as non-current liabilities in the notes payable balance as of December 31,2021 in the statement of financial position?
- Current Attempt in Progress On January 1, 2024, Blossom Inc. purchased an investment in Drexall Inc. bonds for $167,000, at par value. The bonds pay interest on December 31 each year. However, the company has determined that, due to a default on making interest and principal payments, there is objective evidence of impairment, which represents a triggering or loss event. The present value of the discounted revised cash flows is $116,100 using the original effective interest rate and $106,100 using the current market interest rate. The market value of the bonds is $96,100. Prepare the journal entries for impairment under ASPE and IFRS, respectively, assuming the company uses the amortized cost model. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries.) Account Titles ASPE IFRS eTextbook and Media List…On January 1, 2020, Concord Company makes the two following acquisitions. 1. Purchases land having a fair value of $370,000 by issuing a 4-year, zero-interest-bearing promissory note in the face amount of $561,686. 2. Purchases equipment by issuing a 7%, 8-year promissory note having a maturity value of $550,000 (interest payable annually). The company has to pay 11% interest for funds from its bank. (a) Record the two journal entries that should be recorded by Concord Company for the two purchases on January 1, 2020. (b) Record the interest at the end of th9. On August 20, 2024, Madak Co. decides to invest excess cash of $2,900 by purchasing Wolf, Inc. bonds. At year-end, December 31, 2024, the market price of the bonds was $2,600. The K- investment is categorized as available-for-sale debt Joumalize the adjusting entry needed at December 31, 2024. (Record debits first, then credits. Select the explanation on the last line of the journal entry table) Date 2024 Dec 31 Accounts and Explanation Debit Co Credit