On January 1, 2011, an entity issues bonds with face amount of P5,000,00 for P5,733,129. The bondsmature on December 31, 2013 and pay annual interest of 14%, The effective interest rate is 8%.Required: Prepare all the journal entries during the term of the bonds. PeriodJan 1, 2011Dec 31, 2011Dec 31, 2012Dec 31, 2013TotalCarryingAmount ofBondsP5,773,129P5,534,979P5,277,778Interest PaidInterest Expense(Face value x Nominal (Carrying Amount x EffectiveRate)Rate)(5,000,000 x 14%)(Carrying Amount x 8%)P700,000P461,850P700,000P442,798P700,000P422.222PremiumAmortization(Interest Paid - (InterestExpense)P238,150P257,202P277,778P773,129Carrying Value ofBonds Payable(Previous Carrying Amount -Premium Amortization)P5,773,129P5,534,979P5,277,778P5,000,000

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Answered: n January 1, 2011, an entity issues…

n January 1, 2011, an entity issues bonds with face amount of P5,000,00 for P5,733,129. The bonds mature on December 31, 2013 and pay annual interest of 14%, The effective interest rate is 8%.

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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