PROBLEMS Problem 6-1 (IAA) vs ission on January 1, 2099 Company received permiss pemeyrnre bonds with face amount of P6,000,000 maturing op, January 1, 2030. ble annually on December 31. The bonds the terest is payal Interest is pay: 4 interest. callable at 102 plus accrue! On January 1, 2020, the entity issued the bonds for P6,737,099 with an effective yield of 10%. The fiscal year of the entity ends December 31. The effective interest amortization is used. Required: 1. Prepare journal entries relating to the bonds payable for 2020. 2. Present the bonds payable on December 31, 2020. Problem 6-2 (IAA) On January 1, 2020, Orange Company was authorized to issue 6% bonds with face amount of P5,000,000 maturing on December 31, 2021. Interest is payable semiannually on June 30 and December 31. On January 1, 2020, the entity issued all of the bonds for P4,818,500 with an effective rate of 8%. The fiscal year of the entity is the calendar year and the effective interest method of amortization is used. Required: 1. Prepare a table of amortizatio: i ‘ n for the discount. 2. Prepare journal entries for 2020 and 2021. 4 224problem 6-3 (IAA) jue Company issued, in a Private placem i iavortment house, P3,000,000 ‘ace amount of ase oe pone. Interest is payable semiannual} ; 31 of each year. 'Y on June 30 and December The bonds were issued on January 1, 2020 at a price yieldi a Z : price yielding the entity P2,738,682 which represents an effective interest cost of 20% per year, Required: a, Prepare an amortization table, showing the interest expense for each six-month period on the effective interest basis. Round all computations to the nearest peso. Prepare journal entries to record the issuance of the bonds, the interest expense at the end of the first six months and the last six months of the bond issue, and the retirement of the bonds at maturity. Problem 6-4 (ACP) Clan Company issued 3-year 12% bonds with face amount of P2,000,000. Interest is payable semiannually April 1 and October 1. The bonds were issued on April 1, 2020 for P2,101,520 which represents an effective interest’ cost of 10% per year. Required: 1. Prepare an amortization table using the effective interest method. 2. Prepare journal entries for 2020 and 2021. i 225Problem 6-5 (PHILCPA Adapted) ae On December 31, 2020, Dome Company eof P80, "$00.00; 8% serial bonds, to be repaid in the amount ieee 0 each year. Interest is payable annually on Decem| x nds were issued to yield 10% a year. aled P3,805,600 based on the present 2020 of five annual payments. Present value Interest on 12/31/2029 The bond proceeds tot: value on December 31, Due date Principal 12/31/2021 800,000 sano #018 000 12/31/2022 800,000 2 a ee 12/31/2023 800,000 192, fess oo 12/31/2024 800,000 128,000 nee 12/31/2025 800,000 64,000 ‘ , 3,805,600 Required: 1. Determine the carrying amount of the bonds payable on December 31, 2021. The interest method of amortizing bond discount is used. 2. Prepare journal entries for 2021. Problem 6-6 (ACP) Dumaguete Company issued bonds with face amount of P6,000,000 on January 1, 2020. The nominal rate of 6% is payable annually on December 31. The bonds are issued with an 8% effective yield. The bonds mature on every December 31 each year at the rate of P2,000,000 for three years. Present value of 1 at 8% One period Two periods om Three periods 0.7938 Required: 1. Determine the market price or issue price of the bonds. 2. Prepare journal entries fc ive i method of amortization is wa ahs oer een 3. Determine the ca; : December 31, 2020 ne amount of the bonds payable on 226problem 6-7 (LAA) One ry 12020 wae Company issued 10% bonds dated soraire on December 31 2oanunt of P20,000,000. The bonds For bonds of similar risk 12%. Interest is paid semi, 31. The PV of 1 at 6% for 20 ordinary annuity of 1 and Maturity, the market yield is ‘annually on June 30 and December Periods is 0.3118 and the PV of an at 6% for 20 periods is 11.47. Required: 1, Determine the price of the bonds on January 1, 2020. 2. Prepare the journal entry to record the bond issuance on January 1, 2020. 3. Prepare the journal entry to record interest expense on June 30, 2020 using the effective interest method. 4. Prepare the journal entry to record interest expense on December 31, 2020 using the effective interest method. Problem 6-8 (IAA) On January 1, 2020, Mania Company issued 12% bonds dated January 1, 2020 with face amount of P20,000,000. The bonds mature on December 31, 2029. For bonds of similar risk and maturity, the market yield is 10%. Interest is paid semiannually on June 30 and December 31, The PV of 1 at 5% for 20 periods is 0.377 and the PV of an ordinary annuity of 1 for 20 periods is 12.46. Required: 1. Determine the price of the bonds at January 1, 2020. 2 Prepare the journal entry to record the bond issuance on January 1, 2020. ¥ 3. Prepare the journal entry to record interest expense on June 30, 2020 using the effective interest method. 4. Prepare the journal entry to record interest expense on December 31, 2020 using the effective interest method. 227Problem 6-9 (ACP) bated rash i Company 18} ce a moe a 300, top and stated interest tae ee The iateeeat § payable semiannually ee ti af the ater ture on every ie Oo hos oun: un for 2 years. The prevailing market rate for the bonds is 8%. Present value of 1 at 4% 0.9615 One period pend ‘Two periods o3a%e Three periods DER Four periods o Required: 1. Compute the market price of the bonds on January 1, 2020. 2. Prepare a table of amortization using the effective interest method. 3. Prepare journal entries for 2020 and 2021. Problem 6-10 (IAA) On March 1, 2020, Pyramid Company issued 10% bonds with face amount of P7,000,000 to yield 8%. Interest is payable semiannually on March 1 and September 1. The bonds mature in 10 years. The entity follows the calendar year. PV of 1 at 5% for 20 periods 377 PV of 1 at 4% for 20 periods 456 PV ofan ordinary annuity of 1 at 5% for 20 periods 12.462 PV of an ordinary annuity of 1 at 4% for 20 periods 13.590 Required: 1 Determine the market price or issue price of the bonds. . Prepare an effective interest amortization table for the first two interest Periods. 3. Prepare journal entries for 2020. 228pana problem 6-11 (TAA) June 1, 2020, Java Company i i on Sunt of P6,000,000 to vega . sean 10% bonds with face Interest is payable annually on uy June 1 of eac mature it 5 years. The entity of each year. The bonds follows calendar year. pVof1 at 10% for 5 periods 62 pVof lat 12% for 5 periods ‘57 pVofan ordi nary annuity of 1 at 10% for 5 periods 3.79 pVofan ordinary annuity of 1 at 12% for 5 periods 3.60 Required: 1. Determine the market price or issue price of the bonds. 2. Prepare an effective interest amortization table for the first two interest periods. 3. Prepare journal entries for 2020 and 2021. Problem 6-12 (IAA) On January 1, 2020, Katrina Company issued at par 5,000, 10% bonds with a face amount of P1,000 per bond. The bonds have a five-year term, and pay interest annually every December 31 of each year. The entity elected the fair value option in measuring the bonds Payable. On December 31, 2020 and 2021, the risk factors indicated that the rate of interest applicable to the borrowings was 8% and 12% respectively. . PV of 18% 4 periods 0.735 PV ofan ordinary annuity of 1 8% 4 periods 3.312 PV of 1 12% 3 periods 0.712 PVotan ordinary annuity of 1 12% 8 periods 2.404 Required: Prepare journal entries for 2020 and 2021. 229