Bonds and Investment in Associate

Maker Company purchased a held to maturity instruments with a face value of P5,000,000 on January 2, 2016. The bonds will mature on January 2, 2019 and the nominal rate of interest is 12%. Interest is payable annually every December 30. The market rate of interest on this date is 10%.

How much did Maker pay in acquiring the instruments? (Round off PV factor to three decimal places)

• P5,247,610

• P5,326,006

• P5,348,580

• P5,379,600

On January 1, 2021, Dean Company purchased ten-year bonds with a face value of ₱1,000,000 and a stated interest rate of 8% per year payable semiannually July 1 and January 1. The bonds were acquired to yield 10%.

What is the purchase price of the bonds?

• ₱1,124,620

• ₱1,100,000

• ₱1,000,000

• ₱875,380

On January 1, 2018, Tabular Company purchased bonds with face value of ₱2,000,000. The bonds are dated January 1, 2018 and mature on January 1, 2022. The interest on the bonds is 10% payable semiannually every June 30 and December 31. The prevailing market rate of interest on the bonds is 12%.

What is the present value of the bonds on January 1, 2018?

• ₱1,881,000

• ₱1,888,000

• ₱1,360,000

• ₱1,480,000

It is an entity, including an unincorporated entity such as a partnership over which the investor has significant influence and that is neither a subsidiary nor an interest in joint venture.

• Associate

• Investee

• Venture capital organization

• Mutual fund

When an investor uses the equity method to account for investment in ordinary shares, cash dividends received by the investor from the investee should be treated as

• Dividend income

• An addition to the investor’s share of the investee’s profit

• A deduction from the investor’s share of the investee’s profit

• A deduction from the investment account

On January 1, 2021, Saxe Company purchased 20% of Lax Company’s ordinary shares outstanding for ₱6,000,000. The acquisition cost is equal to the book value of the net assets acquired. During 2021, Lax reported net income of ₱7,000,000 and paid cash dividend of ₱4,000,000. What is the balance in the investment in Lax Company on December 31, 2021?

• ₱5,200,000

• ₱6,600,000

• ₱6,000,000

• ₱7,400,000

On January 1, 2021, Well Company purchased 10% of Rea Company’s outstanding ordinary shares for ₱4,000,000. Well is the largest single shareholder in Rea and Well’s officers are a majority of Rea’s board of directors. Rea reported net income of ₱5,000,000 for 2021 and paid dividends of ₱1,500,000.

In its December 31, 2021 statement of financial position, what amount should Well report as investment in Rea?

• ₱4,500,000

• ₱4,000,000

• ₱4,350,000

• ₱3,850,000

On July 1, 20221, Denver Company purchased 30,000 shares of Eagle Company’s 100,000 outstanding ordinary shares for ₱200 per share. On December 15, 2021, Eagle paid ₱400,000 in dividends to its ordinary shareholders. Eagle’s net income for the year ended December 31, 2021 was ₱1,200,000, earned evenly throughout the year. In its 2021 income statement, what amount of income from the investment should Denver report?

• ₱360,000

• ₱120,000

• ₱180,000

• ₱60,000