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On January 1, 20x1, SPITEFUL MALICIOUS Co. issued 1,000, P4,000, 10%, 3-year bonds for P3,807,852. Principal is due on December 31, 20x3 but interests are due annually every year-end. The effective interest rate is 12%. SPITEFUL Co. incorrectly used the straight line method instead of the effective interest method to amortize the discount. What is the effect of the error on the carrying amount of the bonds on December 31, 20x1? (over) understated a. 7,107 b. (7,107) c. 6,341 d. (6,341)

On January 1, 20x1, SPITEFUL MALICIOUS Co. issued 1,000, P4,000, 10%, 3-year bonds for P3,807,852. Principal is due on December 31, 20x3 but interests are due annually every year-end. The effective interest rate is 12%. SPITEFUL Co. incorrectly used the straight line method instead of the effective interest method to amortize the discount. What is the effect of the error on the carrying amount of the bonds on December 31, 20x1? (over) understated a. 7,107 b. (7,107) c. 6,341 d. (6,341)

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Please answer number 6 (include excel if needed)

3. On January 1, 20x1, SMUDGE BLUR Co. issued 1,000, P4,000, 12%, 3-year bonds for P4,198,948. Principal is due on December 31, 20x3 but interests are due annually every year-end. The effective interest rate is 10%. How much is the unamortized discount or premium on bonds payable as of December 31, 20x1? a. 198,948 b. 135,204 c. 138,843 d. 143,134 4. On January 1, 20x1, SLOPPY UNTIDY Co. issued 10%, P4,000,000 bonds at face amount. SLOPPY paid underwriter's commission of P192,147. The bonds mature on December 31, 20x3. Interest is due annually. The effective interest on the bond issue is approximately equal to a. 9.2659% b. 11.3692% c. 12% d. 13.5% 5. On March 1, 2002, Rxne Furmiture Co. issued P700,000 of 10 percent bonds to yield 8 percent. Interest is payable semiannually on February 28 and August 31. The bonds mature in ten years. Pne Fumiture Co. is a calendar-year corporation. How much is the issue price of the bonds? a. 792,335 b. 795,132 c. 802,336 d. 809,667 6. On January 1, 20x1, SPITEFUL MALICIOUS Co. issued 1,000, P4,000, 10%, 3-year bonds for P3,807,852. Principal is due on December 31, 20x3 but interests are due annually every year-end. The effective înterest rate is 12%. SPITEFUL Co. incorrectly used the straight line method instead of the effective interest method to amortize the discount. What is the effect of the error on the carrying amount of the bonds on December 31, 20x1? (over) understated a. 7,107 b. (7,107) c. 6,341 d. (6,341) 7. On April 1, 20x1, SQUALID FILTHY Co. issued 12%, P4,000,000 bonds dated January 1, 20x1 at 97 induding accrued interest. The bonds mature in ten years and pay interest annually every year-end. How much is the initial carrying amount of the bonds? a. 3,760,000 b. 3,880,000 d. 3,812,341 c. 4,000,000
Transcribed Image Text:3. On January 1, 20x1, SMUDGE BLUR Co. issued 1,000, P4,000, 12%, 3-year bonds for P4,198,948. Principal is due on December 31, 20x3 but interests are due annually every year-end. The effective interest rate is 10%. How much is the unamortized discount or premium on bonds payable as of December 31, 20x1? a. 198,948 b. 135,204 c. 138,843 d. 143,134 4. On January 1, 20x1, SLOPPY UNTIDY Co. issued 10%, P4,000,000 bonds at face amount. SLOPPY paid underwriter's commission of P192,147. The bonds mature on December 31, 20x3. Interest is due annually. The effective interest on the bond issue is approximately equal to a. 9.2659% b. 11.3692% c. 12% d. 13.5% 5. On March 1, 2002, Rxne Furmiture Co. issued P700,000 of 10 percent bonds to yield 8 percent. Interest is payable semiannually on February 28 and August 31. The bonds mature in ten years. Pne Fumiture Co. is a calendar-year corporation. How much is the issue price of the bonds? a. 792,335 b. 795,132 c. 802,336 d. 809,667 6. On January 1, 20x1, SPITEFUL MALICIOUS Co. issued 1,000, P4,000, 10%, 3-year bonds for P3,807,852. Principal is due on December 31, 20x3 but interests are due annually every year-end. The effective înterest rate is 12%. SPITEFUL Co. incorrectly used the straight line method instead of the effective interest method to amortize the discount. What is the effect of the error on the carrying amount of the bonds on December 31, 20x1? (over) understated a. 7,107 b. (7,107) c. 6,341 d. (6,341) 7. On April 1, 20x1, SQUALID FILTHY Co. issued 12%, P4,000,000 bonds dated January 1, 20x1 at 97 induding accrued interest. The bonds mature in ten years and pay interest annually every year-end. How much is the initial carrying amount of the bonds? a. 3,760,000 b. 3,880,000 d. 3,812,341 c. 4,000,000
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