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How much is the cash received upon issuance

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Question - On Jan. 1, 2007, Manila company issued 5-year bonds with face value of 4,000,000 at 110. The company paid bond issue cost of 64,000 on same date. The stated interest rate on bonds is 8% payable annually every Dec. 31. The bonds are issued to yield 6% per annum. Manila company uses the effective interest method of amortization.

Required -

a. Prepare the table of amortization.

b. Prepare the journal entries from issuance until the end of 3rd year.

c. Answer the following questions:

Q1. How much is the cash received upon issuance?

Q2. What is the carrying amount of the bonds at the end of 2nd year?

Q3. How much is the interest expense to be reported in the Income statement for the 3rd year?

 

Reference no: EM132696184

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