Financial Asset at Amortized Cost

1. On October 1, 2017, York Company purchased 4,000 of the 1,000 face value, 10% bonds of Dell
Company for 4,100,000 which include accrued interest of 100,000. The bonds, which mature on
January 1, 2024, pay interest semi-annually on January 1 and July 1. York uses the straight-line
method of amortization and appropriately recorded the bonds as a long-term investment. The
bonds should be shown on Yorks December 31, 2017 balance sheet at?

2. On July 1, 2017, Cola Company paid 1,198,000 of 10%, 20-year bonds with a face amount of
P1,000,000. Interest is paid on December 31 and June 30. The bonds were purchased to yield
8%. Cola uses the effective interest method to recognize interest income from this investment.
What should be reported as the carrying amount of the bonds in December 31, 2017 balance
sheet?

3. On January 1, 2017, Pearl Company purchased as a long-term investment P5,000,000 face value
of Show Companys 8% bonds for 4,562,000. The bonds were purchased to yield 10% interest.
The bonds mature on January 1, 2022 and pay interest annually on December 31. The interest
method of amortization is used. What is the carrying amount of the investment on December
31, 2018?

4. On July 1, 2017, Yolk Company purchased as a long-term investment P1,000,000 of Pack

Companys 8% bonds for 940,000, including accrued interest of P40,000. The bonds were
purchased to yield 10% interest. The bonds mature on January 1, 2021, and pay interest on
annually on January 1. Yolk uses the effective interest method of amortization. In its December
31, 2017 balance sheet, what amount should Yolk report as investment in bonds?

5. On July 1, 2017, Pellet Company purchased Grown Company ten-year, 8% bonds with a face
amount of P5,000,000 for P4,200,000. The bonds mature on June 30, 2025 and pay interest
semi-annually on June 30 and December 31. Using the interest method, Pellet recorded bond
discount amortization of 20,000 for the first six months ended December 31, 2017. From this
long term investment, Pellet should report 2017 income of?