Bonds issued at a discount - with Transaction costs 1. On January 1, 20x1, an entity issues
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Bonds issued at a discount - with Transaction costs
1. On January 1, 20x1, an entity issues bonds with face amount of P5,000,000 for P4,800,000. The bonds mature on December 31 20x3 and pay annual interest of 10% every December 31.The entity incurs bond issue costs of P473,767.The effective interest rate adjusted for bond issue costs is 16%.
Requirements:
a. Compute for the initial carrying amount of the bonds.
b. Compute for net discount or a 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.
Expert Answer:
O According to IFRS 9 bond issue cost initially will decrease the issue price of the bonds therefore ... View the full answer
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