January 1, 2020, Patrick Corporation issued P10 million bonds that will mature in five years. The bond indenture requires Patrick to establish a sinking fund for the retirement of these bonds, with semi-annual deposit every June 30 and December 31, starting June 30, 2020 up to December 31, 2024 in time for the maturity of the bonds. The fund is to be placed in a separate account to be maintained in the company's depository bank. Using an average annual interest rate of 10% (net of tax) expected to be earned on this investment, the company determined that the required semi-annual deposit to be able to accumulate a total of P10 million is P795,045.27. How much is the bond sinking fund balance at December 31, 2020 after making the required semi-annual deposits in the fund? A. P 795,045.27 B. P 834,797.53 C. P1,669,595.00
On January 1, 2020, Patrick Corporation issued P10 million bonds that will mature in five years. The bond indenture requires Patrick to establish a sinking fund for the retirement of these bonds, with semi-annual deposit every June 30 and December 31, starting June 30, 2020 up to December 31, 2024 in time for the maturity of the bonds.
The fund is to be placed in a separate account to be maintained in the company's depository bank. Using an average annual interest rate of 10% (net of tax) expected to be earned on this investment, the company determined that the required semi-annual deposit to be able to accumulate a total of P10 million is P795,045.27.
How much is the bond sinking fund balance at December 31, 2020 after making the required semi-annual deposits in the fund?
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