Question
On November 1, 2020, A Company issued its 9% callable bonds in the face amount of P2.5 M which matures on October 31, 2030. The
On November 1, 2020, A Company issued its 9% callable bonds in the face amount of P2.5 M which matures on October 31, 2030. The market rate of the bonds is 12%. The interest payment date is on April 30 and October 31. A Company uses the effective interest of amortizing discount and premium.
Use the table below to compute the present values:
12% | 9% | 6% |
| |
The present value of 1 for 10 periods | 0.3220 | 0.4224 | .5584 | 0.6439 |
The present value of 1 for 20 periods | 0.1037 | 0.1784 | 0.3118 | 0.4146 |
The present value of an ordinary annuity for 10 periods | 5.650 | 6.4177 | 7.361 | 7.9127 |
The present value of an ordinary annuity for 20 periods | 7.469 | 9.1286 | 11.4699 | 13.0079 |
Required:
1. Compute for the issue price of the bonds.
2. Complete the amortization table below: Round-off your answer to whole numbers.
Date | Int payment | Interest Expense | Premiium or Discount Amortization | UnAmortized Premium/Discount | Carrying Value |
Nov 1, 2020 | |||||
April 30, 2021 | |||||
October 31, 2021 |
3. Compute for the amount of interest expense recorded on the December 31, 2020 journal entry.
5. Compute for the carrying amount of the Bonds Payable on December 31, 2020.
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