On January 1, 20x1, an entity issues bonds with a face amount of P8,000,000 for P8,600,000. The bonds mature on December 31, 20x4 and pay annual interest of 11% every December 31. The entity incurs transaction costs of P81,645. The effective interest rate adjusted for transaction costs is 9%. ◦Requirements: ◦A. Compute for the initial carrying amount of the bonds. ◦B. Compute for the net discount or net premium (including the effect of the bond issue cost) from the issuance on initial recognition. ◦C. Are the periodic interest payments greater than or less than the periodic interest expenses? ◦D. Prepare all the journal entries during the term of the bonds.

On January 1, 20x1, an entity issues bonds with a face amount of P8,000,000 for P8,600,000. The bonds mature on December 31, 20x4 and pay annual interest of 11% every December 31. The entity incurs transaction costs of P81,645. The effective interest rate adjusted for transaction costs is 9%. ◦Requirements: ◦A. Compute for the initial carrying amount of the bonds. ◦B. Compute for the net discount or net premium (including the effect of the bond issue cost) from the issuance on initial recognition. ◦C. Are the periodic interest payments greater than or less than the periodic interest expenses? ◦D. Prepare all the journal entries during the term of the bonds.

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 4EA: On January 1, 2018, Wawatosa Inc. issued 5-year bonds with a face value of $200,000 and a stated...

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