Illustrative Accounting Entries on Financial Assets

a. Financial Assets classified as Held-to-Maturity

On January 1, 2014 the BTr purchased a 5-year 5% P100,000 face value bonds for P95,787.63. The issuer
pays the interest annually. The prevailing interest rate is 6%. The table below shows the amortization of
bond discount.Illustrative Accounting Entries on Financial Assets a. Financial Assets classified as
Held-to-Maturity On January 1, 2014 the BTr purchased a 5-year 5% P100,000 face value bonds for
P95,787.63. The issuer pays the interest annually. The prevailing interest rate is 6%. The table below
shows the amortization of bond discount.

Note: On maturity date December 31, 2018, the carrying amount of the investment is P100,000 which is
equal to the face value of the bond.

The accounting entries in the books of the BTr are as follows:

Account Title Account Code Debit Credit

January 1, 2014
Investment in Bonds 10203020 P 95,787.63
Cash in Bank-Local Currency,
Bangko Sentral ng Pilipinas 10102010 P 95,787.63

To recognize investment in bonds Note: Cash in Bank-Local Currency, Current Account and Cash in
Bank-Local Currency, Savings Account may also be used.
 Account Title Account Code Debit Credit
December 31, 2014
Cash in Bank-Local Currency,
Bangko Sentral ng Pilipinas 10102010 P 5,000
Interest income 40202210 P 5,000
To recognize receipt of annual interest

Investment in Bonds 10203020 P 747.26

Interest income 40202210 P 747.26
To recognize amortization of bond discount

December 31, 2015

Cash in Bank-Local Currency,
Bangko Sentral ng Pilipinas 10102010 P 5,000
Interest income 40202210 P 5,000
To recognize receipt of annual interest

Investment in Bonds 10203020 P 792.09

Interest income 40202210 P 792.09
To recognize amortization of bond discount

December 31, 2016

Cash in Bank-Local Currency,
Bangko Sentral ng Pilipinas 10102010 P 5,000
Interest income 40202210 P 5,000
To recognize receipt of annual interest

Investment in Bonds 10203020 P 839.62

Interest income 40202210 P 839.62
To recognize amortization of bond discount

December 31, 2017

Cash in Bank-Local Currency,
Bangko Sentral ng Pilipinas 10102010 P 5,000
Interest income 40202210 P 5,000
To recognize receipt of annual interest

Investment in Bonds 10203020 P 890

Interest income 40202210 P 890
To recognize amortization of bond discount
December 31, 2018
Cash in Bank-Local Currency,
Bangko Sentral ng Pilipinas 10102010 P 5,000
Interest income 40202210 P 5,000
To recognize receipt of annual interest

Investment in Bonds 10203020 P 943.40

Interest income 40202210 P 943.40
To recognize amortization of bond discount

Cash in Bank-Local Currency,

Bangko Sentral ng Pilipinas 10102010 P 100,000
Investment in Bonds 10203020 P 100,000
To recognize maturity of investment in bonds
Illustrative Accounting Entries on Financial Liabilities

On January 1, 2014 the BTr issued a 5-year 9% P100,000 domestic bonds at 10% effective
interest rate for P96,149. Interests are paid semi-annually. The amortization schedule based on
the information given is presented below:

The accounting entries are as follows: