An entity purchased 8 year debt instruments with a face value of P4,000,000 on January 1, 2017 for trading purposes. Interest is paid annually at a nominal rate of 11% that is paid every December 31....

An entity purchased 8 year debt instruments with a face value of P4,000,000 on January 1, 2017 for trading purposes. Interest is paid annually at a nominal rate of 11% that is paid every December 31. The following information is provided as follows:

Requirements:

1. What is the initial carrying amount of the bond investment?


2. What is the 2017 interest income?


3. What is the December 31, 2017 carrying amount?


4. How much is the 2018 unrealized gain recognized in the income statement?


5. What is the total or net amount recognized in profit or loss in 2019?


6. If the entity changes its business model in 2018 to collect contractual cash flows only, what is the 2019 interest income?


7. If the entity changes its business model in 2018 to both collect contractual cash flows and to sell financial assets, what is the cumulative unrealized gain or loss in equity as of December 31, 2019?