Question

On January 1,2021, Mhelson Co. acquired an equipment with a fair value of ₱5,080,000 by assuing 500 bonds. Each bond has a face value of ₱10,000 and fair value of ₱10,200.

Based on the above data, answer the following:

1. How much is the initial cost of the equipment?

2. How much is the gain (or loss) on exchange to be recognized in the profit or loss of Mhelson Co.?

Answer 1

The fair value of the bond is not considered in bond accounting.

Bonds are accounted at its face value in the financial statements.