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An entity issued ten-year P1,000,000 debenture bonds at the beginning of the current year. The bonds pay interest semiannually on June 30 and December 31. The entity used the effective interest method to amortize bond premium and discount. The carrying amount of the bonds on this date was P886,000. A journal entry was recorded for the first interest payment on June 30, debiting interest expense for P53,160 and crediting cash for P50,000. What is the annual stated interest rate for the debenture bond?

An entity issued ten-year P1,000,000 debenture bonds at the beginning of the current year. The bonds pay interest semiannually on June 30 and December 31. The entity used the effective interest method to amortize bond premium and discount. The carrying amount of the bonds on this date was P886,000. A journal entry was recorded for the first interest payment on June 30, debiting interest expense for P53,160 and crediting cash for P50,000. What is the annual stated interest rate for the debenture bond?

College Accounting, Chapters 1-27
College Accounting, Chapters 1-27
23rd Edition
ISBN:9781337794756
Author:HEINTZ, James A.
Publisher:HEINTZ, James A.
Chapter22: Corporations: Bonds
Section: Chapter Questions
Problem 2CE
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An entity issued ten-year P1,000,000 debenture bonds at the beginning of the current year. The bonds pay interest semiannually on June 30 and December 31. The entity used the effective interest method to amortize bond premium and discount. The carrying amount of the bonds on this date was P886,000. A journal entry was recorded for the first interest payment on June 30, debiting interest expense for P53,160 and crediting cash for P50,000. What is the annual stated interest rate for the debenture bond?

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