On January 1, 2020, MNOCompany issued its 9%, P2 million bonds, which mature on January 1, 2030. The bonds were issued for P1,878,000 to yield 10% resulting in a bond discount of P122,000. Interest is payable annually on December 31. What is the carrying amount of the bonds at December 31, 2020?

On January 1, 2020, MNOCompany issued its 9%, P2 million bonds, which mature on January 1, 2030. The bonds were issued for P1,878,000 to yield 10% resulting in a bond discount of P122,000. Interest is payable annually on December 31. What is the carrying amount of the bonds at December 31, 2020?

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 6MC: On July 1, a company sells 8-year $250,000 bonds with a stated interest rate of 6%. If interest...

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Concept explainers

Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.

Question

On January 1, 2020, MNOCompany issued its 9%, P2 million bonds, which mature on January 1, 2030. The bonds were issued for P1,878,000 to yield 10% resulting in a bond discount of P122,000. Interest is payable annually on December 31.

What is the carrying amount of the bonds at December 31, 2020?

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