Reference no: EM132522596

Given the following information:

Face amount of bonds: P5,000,000

Stated interest rate: 6%

Yield rate: 9%

Term: 10 years

Compute the issue price of the bonds with the following scenario:

1. Principal is payable equally at the end of each year with corresponding stated interest;
2. Principal is payable at end of term while interest is payable annually; and
3. Principal and interest accumulated are both payable at the end of the term.

Given the following information:

Face amount of bonds: P5,000,000

Issue price: P5,750,000

Stated interest rate: 6%

Yield rate: 9%

Compute the following with the following scenario:

Question 1: How much is the interest expense under effective interest method?

Question 2: How much is the interest expense under fair value method?

Question 3: What is the carrying amount at the end of first year using effective interest method assuming interest is payable annually while principal is payable at the end of the term?