Question
On July 1, 2020, Glamorous Corporation issued 11% bonds in the face amount P2,000,000 that mature on June 30,2024. The bonds were issued to yield
On July 1, 2020, Glamorous Corporation issued 11% bonds in the face amount P2,000,000 that mature on June 30,2024. The bonds were issued to yield 5% and interest is payable every January 1 and July 1. Glamorous Corporation uses the effective interest method of amortizing bond premium or discount. The following are the present value factors:
PV of 5% for an ordinary annuity of P1 after 8 periods6.463
PV of 5% after 8 interest periods0. 677
What is the carrying value of the debt instruments as of December 31, 2020?
A.P2,043,640
B.P2,051,086
C.P2,058,176
D.P2,064,930
Problem 3
On January 1, 2018, Trader Company issued its 8%, 4-year convertible debt instrument with a face amount of P6,000,000 for P5,900,000. Interest is payable every December 31 of each year. The debt instrument is convertible into 50,000 ordinary shares with a par value of P100. When the debt instruments were issued, the prevailing market rate of interest for similar debt without conversion options is 10%.
PV of 10% for an ordinary annuity of P1 after 4 periods3.169865
PV of 10% after 4 interest periods0.683013
Q1. What is the amortized cost of the debt as of December 31, 2020?
A.P5,619,616
B.P5,701,578
C.P5,791,735
D.P5,890,909
Q2. What is the amount of interest expense for the year ended December 31,2019?
A.P561,962
B.P570,158
C.P579,173
D.P589,091
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