Reference no: EM132967941

Question - On January 1, 2018, a company issued 8% 5-year bonds with a face value of P4,000,000 at an issue price using an effective rate of 9%. Interest is payable annually every December 31. On July 112020, The company decided to retire the bonds at a retirement price of 97. Accrued interest as of this date was separately paid in cash.

Applicable present value factors are as follows:

PV factor of 8% for 5 periods - 0.68

PV factor for an annuity of 5 at 8% - 3.99

PV factor of 9% for 5 periods - 0.65

PV factor for an annuity of 5 at 9% - 3.89

Required - Compute for the following (round off to whole numbers):

(1) Compute the Interest expense in 2020?

(2) Compute the Accrued interest as of date of retirement?

(3) Compute the Carrying amount of the bonds as of July 10, 2020?

(4) Compute the Gain (loss) on early retirement of the bonds (if your answer is a loss, use parentheses or a negative sign).