Auditing for

Non current liabilities

Case 1 (17 points)

On January 1, 20x1, Kageyama Corporation issues P1,500,000 of 10% bonds at 97 due December 31, 2x10.

Legal and other costs of P24,000 were incurred in connection with the issue. Interest on the bonds is payable

annually each December 31. The P24,000 issue costs are being deferred and amortized on a straight-line basis

over the 10-year term of the bonds. The discount on the bonds is also being amortized on a straight-line basis

over 10 years.

The bonds are callable at 101, and on January 2, 20x6, Kageyama called P900,000 face amount of the bonds

and retired them.

REQUIRED:

1. Unamortized discount on January 2, 20x6 ______________

2. Unamortized bond issue costs on January 2, 20x6 ______________

3. Loss on bond redemption _____________

4. Prepare journal entry to record the retirement.