Question
Yellow Company received permission on January 1, 2018 to issue 12% bonds of P6,000,000 maturing on January 1, 2028. Interest is payable semiannually on January
Yellow Company received permission on January 1, 2018 to issue 12% bonds of P6,000,000 maturing on January 1, 2028. Interest is payable semiannually on January 1 and July 1. The bonds are callable at 102 plus accrued interest. On January 1, 2019, the company sold bonds of P4,000,000 for P4,090,000. The balance of the authorized bond issue was sold for cash on September 1, 2019 for P1,990,000 including accrued interest. The fiscal year of the corporation ends December 31. The company uses straight line method to amortize premium and discount on bonds payable.
Required: After examining the above information, you are to determine the balances of the following on December 31, 2019:
1. Premium on bonds payable
2. Discount on bonds payable
3. Book value of bonds payable
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