On January 1, 2020, Surigao Company issued bonds with face amount of P4,000,000 and stated interest rate of 12%. The interst is payable semiannually on June 30 and December 31. The bonds mature on every Decmebr 31 ata the rate of P2,000,000 per year for 2 years. The prevailing market rate for the bonds is 8%. Present value of 1 at 4% One period 0.9615 Two period 0.9246 Three period 0.8990 Four period 0.8548 Required Compute the market price of the bonds on January 1, 2020. Prepare a table of amortization using the effective interst method. Prepare journal entries for 2020 and 2021.
On January 1, 2020, Surigao Company issued bonds with face amount of P4,000,000 and stated interest rate of 12%. The interst is payable semiannually on June 30 and December 31. The bonds mature on every Decmebr 31 ata the rate of P2,000,000 per year for 2 years. The prevailing market rate for the bonds is 8%. Present value of 1 at 4% One period 0.9615 Two period 0.9246 Three period 0.8990 Four period 0.8548 Required Compute the market price of the bonds on January 1, 2020. Prepare a table of amortization using the effective interst method. Prepare journal entries for 2020 and 2021.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On January 1, 2020, Surigao Company issued bonds with face amount of P4,000,000 and stated interest rate of 12%. The interst is payable semiannually on June 30 and December 31. The bonds mature on every Decmebr 31 ata the rate of P2,000,000 per year for 2 years. The prevailing market rate for the bonds is 8%.
Present value of 1 at 4%
One period 0.9615
Two period 0.9246
Three period 0.8990
Four period 0.8548
Required
- Compute the market price of the bonds on January 1, 2020.
- Prepare a table of amortization using the effective interst method.
- Prepare
journal entries for 2020 and 2021.
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