Answered: AAA Inc. purchased P400,000 of BBB…

AAA Inc. purchased P400,000 of BBB Corp. ten-year bonds with a stated interest rate of 8 percent payable quarterly. At the time the bonds were purchased, the market interest rate was 12 percent.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 1RE

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Question

AAA Inc. purchased P400,000 of BBB Corp. ten-year
bonds with a stated interest rate of 8 percent payable
quarterly. At the time the bonds were purchased, the market
interest rate was 12 percent.
Determine the amount of premium or discount on the
purchase of the bonds.

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