7. On January 1, 2020, Mariel Company iasued bonds payable with face amount of P8,000,000 and 10% stated interest rate at 95. The entity paid bond isaue cost of P150,000. The bonds have a 5-year term and interest is payable annually every December 31. The entity elected the fair value option. On December 31, 2020, the fair value of the bonds is 105. It is reliably determined that the fair value increase comprised P150,000 attributable to eredit risk and the remainder attributable to change in the market interest rate. 1. What is the interest expense for 2020? 2. What amount of gain or loss should be recognized in profit or loss for 2020 to conform with the fair value option? 3. What is the carrying amount of the bonds payable on December 31, 2020? 4. Prepare journal entries for 2020.

7. On January 1, 2020, Mariel Company iasued bonds payable with face amount of P8,000,000 and 10% stated interest rate at 95. The entity paid bond isaue cost of P150,000. The bonds have a 5-year term and interest is payable annually every December 31. The entity elected the fair value option. On December 31, 2020, the fair value of the bonds is 105. It is reliably determined that the fair value increase comprised P150,000 attributable to eredit risk and the remainder attributable to change in the market interest rate. 1. What is the interest expense for 2020? 2. What amount of gain or loss should be recognized in profit or loss for 2020 to conform with the fair value option? 3. What is the carrying amount of the bonds payable on December 31, 2020? 4. Prepare journal entries for 2020.

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

7.
On January 1, 2020, Mariel Company issued bonds payable
with face amount of P8,000,000 and 10% stated interest rate
at 95. The entity paid bond issue cost of P150,000. The bonds
have a 5-year term and interest is payable annually every
December 31.
The entity elected the fair value option. On December 31,
2020, the fair value of the bonds is 105.
It is reliably determined that the fair value increase
comprised P150,000 attributable to credit risk and the
remainder attributable to change in the market interest rate.
1. What is the interest expense for 2020?
2. What amount of gain or loss should be recognized in profit
or loss for 2020 to conform with the fair value option?
3. What is the carrying amount of the bonds payable on
December 31, 2020?
4. Prepare journal entries for 2020.

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