December 1,2018, the Emerald Corporation issued five-year, non-convertible P 5,000,000 face value 12% bonds for P 5,386,072, a price that yields 10%. Interest is payable semi- annually on June 1 and December 1. On August 1,2021, the Emerald Corporation retired P 3,000,000 of the bonds at 105 plus accrued interest. The accounting period for the Emerald Corporation is the calendar year. REQUIRED: (a) Carrying value of the bonds on December 31,2019 (b) Interest expense for the year ended December 31, 2019 (c) Carrying value of the bonds retired on August 1, 2021 (d) Gain or loss on redemption of the bonds on August 1,2021 (e) Carrying value of the bonds on December 31,2021 (f) Interest expense for the years ended December 31, 2021 and 2022
December 1,2018, the Emerald Corporation issued five-year, non-convertible P 5,000,000 face value 12%
bonds for P 5,386,072, a price that yields 10%. Interest is payable semi- annually on June 1 and December 1.
On August 1,2021, the Emerald Corporation retired P 3,000,000 of the bonds at 105 plus accrued interest. The
accounting period for the Emerald Corporation is the calendar year.
REQUIRED:
(a) Carrying value of the bonds on December 31,2019
(b) Interest expense for the year ended December 31, 2019
(c) Carrying value of the bonds retired on August 1, 2021
(d) Gain or loss on redemption of the bonds on August 1,2021
(e) Carrying value of the bonds on December 31,2021
(f) Interest expense for the years ended December 31, 2021 and 2022
Answer for (a),(b), and (c)
A Bond is a amount that is issued by corporation or a government to investors. It is used to raise cash for infrastructure or other activities. It included the periodically coupon payment, or paid off after the maturity date. There are many more feature of bonds exist. Generally bonds issued are of long- term in nature. The person who purchase the bond entitled to get a fixed amount of interest on their bonds. The government uses the bond for fulfill the cash requirements. Government pay regular interest to the bond holders.
in this question we have to find the different values , In this question it is given that the face value of the bonds is 5,000,000. This bonds are issued at 5,386,072 it means the bonds are issued at the premium.
The premium amount of bonds is
= 5,386,072−5,000,000 5,386,072-5,000,000
=386,072386,072
a. In this part of the question we have to find the carrying value of the bond on December 31,2019
carrying value of the bond is equal to
=face
5,000,000+386,0725,386,0725,000,000+386,0725,386,072
hence the carrying value of bond 0n December 31,2019 is 5,386,072.
b. in this part of the question we have to find the interest expense of the bonds. The interest rate of the bonds 10% which is given semi-annually .
Formula of interest = amount of bonds×rate of interestamount of bonds×rate of interest
=5,386,072 ×10%5,386,072 ×10%
= 538607.2538607.2
Hence the amount of interest expense is 538,607.2
c. In this part of the question we have to find the carrying value of bonds retired on August 1,2021. On this day the company retires the 300,000 bonds as 105.
It means company retire bond on premium. Total amount of redemption is 315,000.
hence the carrying value of retired bonds is 315,000.
Please help me solve (d) to (f) and please help me to understand (a) to (f) please use excel to let me understand
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