Case 1: Eveready Company

Eveready Company issued P100,000 of 8% term bonds on January 1, 2X19, due on January 1, 2X24, with interest payable on July 1 and January 1. The company's investors are willing to accept the bond at an effective- interest rate of 6%.

1.What is the present value of P100,000 bonds due in five (5) years at 6% interest payable semiannually?

2.What is the present value of P 4,000 interest payable?

3.What amount would the investors pay for that particular bond?

4.What is the premium/discount at the date of issuance?

5.Provide entry in the books of Eveready on January 1, 2X19.

Case 2: Toyota Corporation

On March 1, 2X19, Toyota Corporation issued at 103 plus accrued interest, 500 of its 9%, P500 bonds. The bonds are dated January 1, 2X19 and mature on January 1, 2X29. Interest is payable semiannually on January 1 and July 1. Toyota paid transaction costs amounting to P5,000.

6.What is the bond issue price at the date of issuance?

7.What amount is the accrued interest at the date of issuance?

8.What is the net cash receipt from the bond issuance?

PART II (SHORT ANSWER)

1.When does the discount on bonds payable arise?

2.When does the premium on bonds payable arise?

3.Applying IFRS 9 Financial Instruments, what is the initial measurement of bonds payable?