On January 1, 20x1, an entity issues bonds with face amount of P5,000,000 for P4,800,000. The bonds mature on December 31, 20x3 and pay annual interest of 10% every December 31. The entity incurs bond issue costs of P473,767. The effective interest rate adjusted for bond issue costs is 16%. Requirement: a. Compute for the initial carrying amount of the bonds. b. Compute for net discount or a net premium (including the effect of the bond issue cost) from the issuance on initial recognition.

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A:

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