On December 31, 2021, Extract Company issued a P40,000,000 5-year of P1 per value each at an issue price of P0.90 per unit. The bond carries a coupon interest of 6% and interest is payable on December 31 each year. Cost of issuing the bond, which included underwriting fees, totalled P2,000,000. The prevailing market rate interest for similar risk class bonds on December 31, 2021 was 10%. Question 1. What is the initial carrying value of the bond on December 31, 2021 assuming Extract Company has the policy to measure the bond at fair value to profit or loss? Question 2. What is the initial carrying value of the bond on December 31, 2021 assuming Extract Company has the policy to measure the bond at amortized cost model?

On December 31, 2021, Extract Company issued a P40,000,000 5-year of P1 per value each at an issue price of P0.90 per unit. The bond carries a coupon interest of 6% and interest is payable on December 31 each year. Cost of issuing the bond, which included underwriting fees, totalled P2,000,000. The prevailing market rate interest for similar risk class bonds on December 31, 2021 was 10%. Question 1. What is the initial carrying value of the bond on December 31, 2021 assuming Extract Company has the policy to measure the bond at fair value to profit or loss? Question 2. What is the initial carrying value of the bond on December 31, 2021 assuming Extract Company has the policy to measure the bond at amortized cost model?

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 3EB: Smashing Cantaloupes Inc. issued 5-year bonds with a par value of $35,000 and an 8% semiannual...

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Smashing Cantaloupes Inc. issued 5-year bonds with a par value of $35,000 and an 8% semiannual coupon (payable June 30 and December 31) on January 1, 2018, when the market rate of interest was 10%. Were the bonds issued at a discount or premium? Assuming the bonds sold at 92.288, what was the sales price of the bonds?
Company I issues a $40,000,000 bond on January 1, 2020 with a coupon rate of 7%. The present value of the bond is $37,282,062 and the market rate of interest was 8%. The bond has a 10-year life and will make semiannual interest payments and will use the straight line amortization method. A) Is the bond issued at a face value, a discount, or premium? B) What is the amount of the semi-annual interest payments? C) What is the amount that will be recorded to interest expense each time an interest payment is made? D) What is the carrying value of the bond on December 31, 2021?
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A firm issues a $10 million bond with a 7% coupon rate, 4 year maturity, and annual interest payments when market interest rates are 6%. The total interest expense reported by the issuer over the life of the bond will be: O $2,453,4891 $2,800,000 O $2,400,000
On January 1, 2021, a company issued an 8-year bond with a coupon rate of 15% and a par value of $ 1,750 that pays annual interest.Calculate the value of the bond based on the information provided with a required yield of 14%.According to the information obtained, is the bond sold at a discount or with a guarantee premium, and what is that value?
On January 1, 2020, Company H issues a $20,000,000 bond with a 9% coupon rate. The bond has a present value of $20,811,010, and the market interest rate was 8%. The bond will have a 5-year life, pay interest semi-annually, and amortize using a straight line. The bond's face value, a discount, or a premium? B) How much would the semi-annual interest payments cost? C) How much will be added to interest expense each time a payment of interest is made? D) What will be the bond's carrying value on December 31, 2021?
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