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Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 4EB: Chung Inc. issued $50,000 of 3-year bonds on January 1, 2018, with a stated rate of 4% and a market...

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Question

On June 1, 2019, Leni Company acquired a 5-year, 10%, P1,000,000 face value bonds for P920,000. The company paid broker’s fees amounting to P118,896. As a result, yield rate on the bond was 9%. Interests are collectible annually every May 31. The bonds were selling at 120, 105, 98 as of December 31, 2019, December 31, 2020 and December 31, 2021, respectively. The company classified the investment as Fair Value through Profit or Loss.

How much is the interest income that should be recognized for the year ended December 31, 2020?

Definition Definition Amount earned or lost on the sale of one or more items is referred to as the profit or loss on that item

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Chung Inc. issued $50,000 of 3-year bonds on January 1, 2018, with a stated rate of 4% and a market rate of 4%. The bonds paid interest semi-annually on June 30 and Dec. 31. How much money did the company receive when the bonds were issued? The bonds would be quoted at what rate?
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