Jimmy issued its bonds payable 3-year 10%, P10,000,000 at par to jeepney Corporation on December 27, 2018. The interest was payable annually. There was a downward trend in the industry that jimmy was operating and became less liquid and is currently experiencing financial difficulties. jimmy paid the interest for 2020. On December 31, 2020 jimmy renegotiated the bond indenture with jeepney corporation.

 

Jeepney corporation agreed to the following modifications:

• The interest rate will be 9%
• Transaction costs of P100,000 was incurred.
• New maturity date will be on December 31, 2023
• The effective rate after considering the transaction cost is 10.412%

Question 1: What is the carrying value of the revised loan as of the date of modification?

Question 2: How much is the interest expense for 2021?

Question 3: Assuming instead of renegotiating, jimmy retired the bonds for P9,150,000 on December 31, 2020. How much was the total cash paid to the bondholder on this date?

Answer rating: 100% (QA)

Answer 1 The carrying value of the revised loan as of the date of modification can be calculated as follows Carrying Value of the Loan Carrying Value ... View the full answer