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Determine the carrying amount of the bonds on December

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Reference no: EM133091130

Question - On May 1, 2020, Purple Inc. issued P8,000,000 of 12% bonds to yield 9% effective rate. Interest is payable semiannually on May 1 and November 1. The bonds mature in 10 years. Purple, Inc. is a calendar-year corporation and uses the effective interest rate method of amortizing bonds. The entity is not using reversing entries.

Required -

1. Prepare journal entries for years 2020 and 2021. Do not compound journal entries on amortization and interest payments.

2. Determine the carrying amount of the bonds on December 31, 2020 and 2021.

3. Determine the interest expense to be reported for years 2020 and 2021.

Reference no: EM133091130

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