PROBLEM 5 (Adapted from Auditing Textbook)

On January 1, 2020, Marcus Company acquired a machinery with a fair value of P 1,900,000 by issuing a 4-year, 12%, P 2,000,000 bonds. Principal is due on December 31, 2023 but the interest is due annually at the end of each year. The prevailing market rate of interest for a similar instrument on January 1, 2020 is 14%. The present value of the future cash flows from the bonds discounted at 10% is P 2,126,776.

1. What would be the journal entries to record the amortization at December 31, 2020?

Date Account Names Debit Credit

1/1/2020

Machinery

(at present value) 2,126,776

Premium on Bonds Payable 126,776

Bonds Payable 2,000,000

1/1/2020 Machinery (at present value) 2,126,776 Premium on Bonds Payable 126.776 Bonds Payable 2.000,000 PROBLEM 6 (Adapted from Auditing Textbook) On December 15, 2020. Tenorio Company amd Jason Company exchanged equipment. The following data are available on the exchange. The exchange is with commercial substance, Tenorio Jason Equipment (cost) 500.000 300,000PROBLEM 5 (Adapted from Auditing Textbook) On January 1, 2020, Marcus Company acquired a machinery with a fair value of P 1,900,000 by issuing a 4-year, 12%, P 2,000,000 bonds. Principal is due on December 31, 2023 but the interest is due annually at the end of each year. The prevailing market rate of interest for a similar instrument on January 1, 2020 is 14%. The present value of the future cash flows from the bonds discounted at 10% is P 2,126,776. 1. What would be the journal entries to record the amortization at December 31, 2020? Date Account Names Debit Credit 1/1/2020 Machinery (at present value) 2,126.776 Premium on Bonds Payable 126.776