2. On Janury 1, 20x1, an entity issues bonds with face amount of P8,000,000 for P8,600,000. The bonds mature on December 31, 20x4 and pay annual interest of 11% every December 31. The entity incurs transactions costs of P81,645. The effective interest rate adjusted for transaction costs is 9%. Requirement: a. Compute for the initial carrying amount of the bonds. b. Compute for net discount or a net premium (including the effect of the bond issue cost) from the issuance on initial recognition. c. Are periodic interest payments greater than or less than the periodic interest expenses? d. Prepare all the journal entries during the term of the bonds.
2. On Janury 1, 20x1, an entity issues bonds with face amount of P8,000,000 for P8,600,000. The bonds mature on December 31, 20x4 and pay annual interest of 11% every December 31. The entity incurs transactions costs of P81,645. The effective interest rate adjusted for transaction costs is 9%. Requirement: a. Compute for the initial carrying amount of the bonds. b. Compute for net discount or a net premium (including the effect of the bond issue cost) from the issuance on initial recognition. c. Are periodic interest payments greater than or less than the periodic interest expenses? d. Prepare all the journal entries during the term of the bonds.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Please put all of the necessary data and computations for better understanding. Thanks ?
Transcribed Image Text:2. On Janury 1, 20x1, an entity issues bonds with face amount of P8,000,000 for P8,600,000. The bonds
mature on December 31, 20x4 and pay annual interest of 11% every December 31. The entity incurs
transactions costs of P81,645. The effective interest rate adjusted for transaction costs is 9%.
Requirement:
a. Compute for the initial carrying amount of the bonds.
b. Compute for net discount or a net premium (including the effect of the bond issue cost) from
the issuance on initial recognition.
c. Are periodic interest payments greater than or less than the periodic interest expenses?
d. Prepare all the journal entries during the term of the bonds.
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