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How much is the initial carrying amount of the bonds

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Reference no: EM132927853

Question - On January 1, 2017, San Jose Co. issued 4-year bond with a face value of P2,000,000 and stated interest of 8%, payable annually every December 31. The company received P1,898,205 and incurred P25,000 of transaction cost which results to an effective rate of 10%. The quoted price of the bonds is as follows:

December 31, 2017 102

December 31, 2018 98

December 31, 2019 99

The bonds were retired on January 7, 2020 at 105 and incurred a transaction cost of P20,000.

Based on the above data and assuming the bonds is classified as financial liability at amortized cost, answer the following:

1. How much is the initial carrying amount of the bonds on January 1, 2017?

A. P1,960,000

B. P1,898,205

C. P1,923,205

D. P1,873,205

2. How much is the interest expense for 2017?

A. P27,321

B. P187,321

C. P160,000

D. P190,053

3. How much is the unrealized gain or loss on 2017?

A. P129,421 loss

B. P -0-

C. P141,795 gain

D. P139,474 loss

4. How much is the carrying amount of the liability on December 31, 2018?

A. P1,923,205

B. P1,930,578

C. P1,960,000

D. P1,963,636

5. How much is the gain (loss) on derecognition?

A. (P120,000)

B. (P116,364)

C. (P100,000)

D. (P156,364)

Reference no: EM132927853

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