Question

1.) On August 1,2018, the Corporation issued P 5,000,000, 8% bonds dated March 1,2018 and maturing on February 28, 2030, for a total consideration of P 4,458,429 which includes accrued interest. The bonds pay interest annually every February 28. The issue price provides a yield of 10%. Corporation closes its books annually every December 31.

REQUIRED:

(a)Prepare all entries in the books of Corporation for the years 2018 and 2019, including year-end adjustments.

(b) How much is interest expense for years 2018 and 2019?

(c)At what amount should the bonds payable be shown on the statement of financial position at December 31,2018 and December 31,2019?

2.) On December 1,2018, the Corporation issued five-year, non-convertible P 5,000,000 face value 12% bonds for P 5,386,072, a price that yields 10%. Interest is payable semi- annually on June 1 and December 1.

On August 1,2021, the Corporation retired P 3,000,000 of the bonds at 105 plus accrued interest. The accounting period for the Corporation is the calendar year.

REQUIRED:

(a) Carrying value of the bonds on December 31,2019

(b)Interest expense for the year ended December 31, 2019

(c)Carrying value of the bonds retired on August 1, 2021

(d)Gain or loss on redemption of the bonds on August 1,2021

(e)Carrying value of the bonds on December 31,2021

(f)Interest expense for the years ended December 31, 2021 and 2022

3.) On January 1, 2018, the Corporation issued P 8,000,000 bonds. The bonds pay interest annually at 12% on the outstanding balance. The face value of the bonds is payable in installments of P 2,000,000 every December 31, starting December 31, 2018. The bonds were sold at a price that yields 8%.

REQUIRED: Determine the following:

(a) Determine the issue price of the bonds on January 1,2018.

(b) Prepare an amortization table using the effective interest method.

(c)Prepare entries in the books of Corporation for years 2018 through 2021 related to the bonds.

4.) Company issued P 10,000,000 bonds on bond issue date, December 31,2018. The bonds pay interest annually at 8% on the outstanding bond balance. The face value of the ends is payable in installments of P 2,000,000 every December 31, starting December 31, 2019. The bonds were sold at a price that yields 12%.

REQUIRED: Determine the following:

(a) Determine the issue price of the bonds on December 31,2018.

(b) Prepare an amortization table using the effective interest method.

(c)Prepare entries in the books of Company for years 2019 through 2021 related to the bonds.

5.) Company issued P 4,000,000 of 8 ½%, 5- year bonds on March 1,2018. Interest payment dates are March 1 and September 1. With a market interest rate of 9%, the bonds were sold for P 3,926,000.

Company retired all of the bonds on September 30,2021 at 101 plus accrued interest.

REQUIRED: Determine the following:

(a) What is the amount of interest expense and discount amortization that company will record on September 1,2018, the first semi- annual interest payment date?

(b) What is the carrying amount of the bonds on the December 31, 2019 statement of financial position, after all year-end adjustments are made?

(c) What amount of cash was paid for the retirement of bonds and payment of accrued interest on May 31, 2021?

What is the gain or loss on retirement of the bonds?

6.) On January 2,2018, Company issued P 10 million of 12% bonds for P 12,734,120 due December 31,2024. Legal and other costs of P 50,000 were incurred in connection with the issue. Interest on the bonds is payable annually each December 31.

Using a financial calculator, the effective interest rate on the these bonds was computed to be 8%, after considering the bond issued cost of P 50,000.

The bonds are callable at 110, and on December 31,2021, after paying the periodic interest, company called P 4,000,000 face amount of the bonds and retired them.

REQUIRED: Determine the following:

(a) Amortization of the premium for the year ended December 31,2018

(b)Carrying value of the bonds on December 31,2021

(c)Gain or loss on retirement of the bonds on December 31, 2021

(d)Interest expense for the year ended December 31, 2022

Carrying value of the bonds on December 31,2022

Answer 1