5. On January 1, 2020, Monterey Company issues 100 million unsecured bonds at an issue price 95 cents per unit. Transaction costs, that include underwriting fee, amount to P500,000. The bonds pay interest of 4% at the end of the first year and thereafter interest payment increases at 1% per year. The bond mature on December 31, 2024 are redeemable at the nominal value of P1 each. At the date of issue, Monterey Company has a credit rating of "ABB" and its market interest rate is 7.09%. But due to the imputation of the transaction cost the effective rate of the debt is 7.21%. What is the amortized cost of the debt as of December 31, 2022?
5. On January 1, 2020, Monterey Company issues 100 million unsecured bonds at an issue price 95 cents per unit. Transaction costs, that include underwriting fee, amount to P500,000. The bonds pay interest of 4% at the end of the first year and thereafter interest payment increases at 1% per year. The bond mature on December 31, 2024 are redeemable at the nominal value of P1 each. At the date of issue, Monterey Company has a credit rating of "ABB" and its market interest rate is 7.09%. But due to the imputation of the transaction cost the effective rate of the debt is 7.21%. What is the amortized cost of the debt as of December 31, 2022?
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:5. On January 1, 2020, Monterey Company issues 100 million unsecured bonds at an issue
price 95 cents per unit. Transaction costs, that include underwriting fee, amount to P500,000.
The bonds pay interest of 4% at the end of the first year and thereafter interest payment
increases at 1% per year. The bond mature on December 31, 2024 are redeemable at the
nominal value of P1 each. At the date of issue, Monterey Company has a credit rating of "ABB"
and its market interest rate is 7.09%. But due to the imputation of the transaction cost the
effective rate of the debt is 7.21%. What is the amortized cost of the debt as of December 31,
2022?
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