Answered: Using effective interest method, what…

Using effective interest method, what amount of the bond discount should be amortized for the six months ended December 31, 2019?

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 4EA: On January 1, 2018, Wawatosa Inc. issued 5-year bonds with a face value of $200,000 and a stated...

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Question

On July 1, 2019, Peter Company issued 4,000 of its 8%, P1,000 face value bonds payable for P3,504,000. The bonds were issued to yield 10%. The bonds are dated July 1, 2019 and mature July 1, 2029. Interest is payable semiannually on January 1 and July 1. Using effective interest method, what amount of the bond discount should be amortized for the six months ended December 31, 2019?

Definition Definition Calculates the present value of a bond's expected future periodic coupon payments. Bond valuation determines the theoretical fair value of a particular bond and helps investors estimate what rate of return they could expect. The bond's theoretical fair value is computed by discounting the future cash flows or coupon payments by an applicable discount rate.

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