Problem 6-5 (PHILCPA Adapted)On December 31, 2020, Dome Company issued P4,000,000,8% serial bonds, to be repaid in the amount of P800,000 eachyear. Interest is payable annually on December 31. The bondswere issued to yield 10% a year.The bond proceeds totaled P3,805,600 based on the presentvalue on December 31, 2020 of five annual payments.Present valueon 12 /31/2020Due datePrincipalInterest12/31/202112/31/2022800,000800,000800,000800,000800,000320,000256,000192,000128,00064,0001,018,000872,200745,000633,800536,60012/31/202312/31/202412/31/20253,805,600Required:1. Determine the carrying amount of the bonds payable onDecember 31, 2021. The interest method of amortizingbond discount is used.2. Prepare journal entries for 2021.

Interest Method of amortizing Bond Discount Under this method, Bond discount is amortized using the…

Answered: 1. Determine the carrying amount of the…

1. Determine the carrying amount of the bonds payable on December 31, 2021. The interest method of amortizing bond discount is used. 2. Prepare journal entries for 2021.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Problem 6-5 (PHILCPA Adapted)
On December 31, 2020, Dome Company issued P4,000,000,
8% serial bonds, to be repaid in the amount of P800,000 each
year. Interest is payable annually on December 31. The bonds
were issued to yield 10% a year.
The bond proceeds totaled P3,805,600 based on the present
value on December 31, 2020 of five annual payments.
Present value
on 12 /31/2020
Due date
Principal
Interest
12/31/2021
12/31/2022
800,000
800,000
800,000
800,000
800,000
320,000
256,000
192,000
128,000
64,000
1,018,000
872,200
745,000
633,800
536,600
12/31/2023
12/31/2024
12/31/2025
3,805,600
Required:
1. Determine the carrying amount of the bonds payable on
December 31, 2021. The interest method of amortizing
bond discount is used.
2. Prepare journal entries for 2021.

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