On Jan. 1, 20x1, Red Co. acquires P500,000 face amount, 10%, bonds of Ball Co. for P487,656. Red Co. incurred transaction costs equal to 5% of the face amount of the bonds. The bonds mature on Dec. 31, 20x3 and pay annual interest every Dec. 31. The bonds were quoted at 102 and 104 on Dec. 31, 20x1 and Dec. 31, 20x2, respectively. 7. What is the effective interest rate on the bonds and how much Is the difference between the interest received and the interest income recognized in 20x2? a. 9%; 3,861 c. 14%; 5,389 d. 9%; 4,208 b. 11%; 6,392
On Jan. 1, 20x1, Red Co. acquires P500,000 face amount, 10%, bonds of Ball Co. for P487,656. Red Co. incurred transaction costs equal to 5% of the face amount of the bonds. The bonds mature on Dec. 31, 20x3 and pay annual interest every Dec. 31. The bonds were quoted at 102 and 104 on Dec. 31, 20x1 and Dec. 31, 20x2, respectively. 7. What is the effective interest rate on the bonds and how much Is the difference between the interest received and the interest income recognized in 20x2? a. 9%; 3,861 c. 14%; 5,389 d. 9%; 4,208 b. 11%; 6,392
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter9: Long-term Liabilities
Section: Chapter Questions
Problem 7MCQ
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