1. On January 1, 20x1, ABC Co. acquired 10%, P 1,000,000 bonds for P 827,135. The bonds mature on December 31, 20x3 and pay annual interest every December 3 ABC Co. incurred transaction costs equal to 8% of the face amount of the bonds acquired. The bonds are measured at amortized cost. The effective interest rate adjusted for the effect of the transaction cost is 14%.

Required: Assume that on July 1, 20x2, the bonds were sold for P 900,000.

Requirement: Provide entries on the date of sale.

2. On January 1, 20x1, ABC Co. acquired 10%, P 3M bonds for P 2,900, 305. The bonds mature in three annual installments of P 1,000,000 every December 3 Interest on the outstanding balance is also due every December 31. The bonds are measured at amortized cost. The effective interest rate is 12%.

 

Requirements:

a. Prepare the amortization table.

b. Prepare the journal entries in 20x1.