On January 1, 2021, HBB Company was authorized to issue 12% bonds with a face amount of ₱5,000,000. Interest on bonds is payable semiannually on January 1 and July. Bonds mature on January 1, 2026. The entire issue was sold on February 28, 2021 at 96 including interest. Bond issue cost amounts to ₱180,000. On October 1, 2023, bonds of ₱2,000,000 face amount were retired at 98 plus accrued interest. Requirements: Prepare all necessary entries for calendar years 2021 and 2023 only. Compute or provide the answers for the following: How much cash was received on February 28, 2021? How much discount or premium was initially recognized? How much is the interest expense for the year ended December 31, 2021?
On January 1, 2021, HBB Company was authorized to issue 12% bonds with a face amount of ₱5,000,000. Interest on bonds is payable semiannually on January 1 and July. Bonds mature on January 1, 2026. The entire issue was sold on February 28, 2021 at 96 including interest. Bond issue cost amounts to ₱180,000. On October 1, 2023, bonds of ₱2,000,000 face amount were retired at 98 plus accrued interest. Requirements: Prepare all necessary entries for calendar years 2021 and 2023 only. Compute or provide the answers for the following: How much cash was received on February 28, 2021? How much discount or premium was initially recognized? How much is the interest expense for the year ended December 31, 2021?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
On January 1, 2021, HBB Company was authorized to issue 12% bonds with a face amount of ₱5,000,000. Interest on bonds is payable semiannually on January 1 and July. Bonds mature on January 1, 2026. The entire issue was sold on February 28, 2021 at 96 including interest. Bond issue cost amounts to ₱180,000. On October 1, 2023, bonds of ₱2,000,000 face amount were retired at 98 plus accrued interest.
Requirements:
- Prepare all necessary entries for calendar years 2021 and 2023 only.
- Compute or provide the answers for the following:
- How much cash was received on February 28, 2021?
- How much discount or premium was initially recognized?
- How much is the interest expense for the year ended December 31, 2021?
- How much is the carrying
value of the bond on December 31, 2021? - How much cash was paid on October 1, 2023?
- How much is the gain or loss on retirement of bonds to be recognized on October 1, 2023?
- How much is the remaining carrying value of the bonds on December 31, 2023?
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