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Ruby Corp. is authorized to issue P 5,000,000 of 5- year bonds dated June 30,2018 with a stated interest rate of 10%. Interest on the bonds is payable semi-annually on June 30 and December 31. The company uses the effective interest method of amortization. The bonds were sold to yield (a) 8%; (b) 12%. REQUIRED: Complete the table below. (a) 8% (b) 12% Bonds issue price Nominal interest for 2018 Interest Expense (Effective interest) for 2018 Premium/ discount amortization in 2018

Ruby Corp. is authorized to issue P 5,000,000 of 5- year bonds dated June 30,2018 with a stated interest rate of 10%. Interest on the bonds is payable semi-annually on June 30 and December 31. The company uses the effective interest method of amortization. The bonds were sold to yield (a) 8%; (b) 12%. REQUIRED: Complete the table below. (a) 8% (b) 12% Bonds issue price Nominal interest for 2018 Interest Expense (Effective interest) for 2018 Premium/ discount amortization in 2018

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 help me understand this problem. the photos attached has the question and answer already I just need to know where the numbers came from and how it is the answer

Ruby Corp. is authorized to issue P 5,000,000 of 5- year bonds dated June 30,2018 with a stated interest rate of 10%. Interest on the bonds is payable semi-annually on June 30 and December 31. The company uses the effective interest method of amortization. The bonds were sold to yield (a) 8%; (b) 12%. REQUIRED: Complete the table below. (а) 8% (b) 1 2% Bonds issue price Nominal interest for 2018 Interest Expense (Effective interest) for 2018 Premium/ discount amortization in 2018 Bond carrying value at December 31,2018 Nominal interest for 2019 Interest Expense for 2019 Premium/discount amortization in 2019 Bond carrying value at December 31,2019
Transcribed Image Text:Ruby Corp. is authorized to issue P 5,000,000 of 5- year bonds dated June 30,2018 with a stated interest rate of 10%. Interest on the bonds is payable semi-annually on June 30 and December 31. The company uses the effective interest method of amortization. The bonds were sold to yield (a) 8%; (b) 12%. REQUIRED: Complete the table below. (а) 8% (b) 1 2% Bonds issue price Nominal interest for 2018 Interest Expense (Effective interest) for 2018 Premium/ discount amortization in 2018 Bond carrying value at December 31,2018 Nominal interest for 2019 Interest Expense for 2019 Premium/discount amortization in 2019 Bond carrying value at December 31,2019
(Ruby Corporation) At 8% 5,405,725 250,000 216,229 33,771 5,371,954 500,000 428,351 71,649 5,300,305 At 12% 4,632,025 250,000 277,922 27,922 4,659,947 500,000 560,970 60,970 4,720,917 Bond issue price Nominal interest for 2018 Interest expense (Effective interest) for 2018 Premium/discount amortization in 2018 Bond carrying value at December 31, 2019 Nominal interest for 2019 Interest expense for 2019 Premium/discount amortization in 2019 Bond carrying value at December 31, 2019 Computations: At 8%: Issue price = (5,000,000 x 0.6756) + (250,000 x 8.1109) = 3,378,000 + 2,027,725 = 5,405,725 Interest Interest Premium Bond Date 06/30/18 12/31/18 06/30/19 12/31/19 Carrying Value 5,405,725 5,371,954 5,336,832 5,300,305 Paid Expense Amortization 250,000 250,000 250,000 216,229 214,878 213,473 33,771 35,122 36,527 65 er 5- Financial Liabilities At 12%: Issue price = (5,000,000 x 0.5584) + (250,000 x 7.3601) = 2,792,000 + 1,840,025 = 4,632,025
Transcribed Image Text:(Ruby Corporation) At 8% 5,405,725 250,000 216,229 33,771 5,371,954 500,000 428,351 71,649 5,300,305 At 12% 4,632,025 250,000 277,922 27,922 4,659,947 500,000 560,970 60,970 4,720,917 Bond issue price Nominal interest for 2018 Interest expense (Effective interest) for 2018 Premium/discount amortization in 2018 Bond carrying value at December 31, 2019 Nominal interest for 2019 Interest expense for 2019 Premium/discount amortization in 2019 Bond carrying value at December 31, 2019 Computations: At 8%: Issue price = (5,000,000 x 0.6756) + (250,000 x 8.1109) = 3,378,000 + 2,027,725 = 5,405,725 Interest Interest Premium Bond Date 06/30/18 12/31/18 06/30/19 12/31/19 Carrying Value 5,405,725 5,371,954 5,336,832 5,300,305 Paid Expense Amortization 250,000 250,000 250,000 216,229 214,878 213,473 33,771 35,122 36,527 65 er 5- Financial Liabilities At 12%: Issue price = (5,000,000 x 0.5584) + (250,000 x 7.3601) = 2,792,000 + 1,840,025 = 4,632,025
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