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On April 1, 2019, Red Company purchased as a trading security a P1,000,000 face value 8%...

On April 1, 2019, Red Company purchased as a trading security a P1,000,000 face
value 8% bond for P920,000 plus brokerage of P12,000 and accrued interest. The
bonds mature on January 1, 2023 and pay interest annually on January 1. On
December 31, 2019, the bonds had a market value of P965,000. For the year ending
December 31, 2019 income statement, what amount should Red report as Unrealized
gain or loss from trading securities?

business   accounting   
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Answer #1

Red Company has purchased the Trading Security @ P 920,000 + 12000 + 20000(1000000*8%*3/12)(Accrued interest)

Carrying amount of the bond in the books of Red Company = P 952,000

Market Value as on Dec 31,2019 = P 965,000

Unrealised Loss from the security as on Dec 31,2019 = 965000 - 952000 = P 13,000

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