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Prepare a table of premium amortization

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Question - MID COMPANY issued 3-year, 12% p.a. bonds with a face amount of P2,000,000. Interest is payable semi-annually April 1 and Oct. 1. The bonds were issued on April 1, 2020 for P2,101,000. On July 1, 2022, a P1,000,000 face value bonds was prematurely retired at 95%. The other P1,000,000 face value bonds was retired on the due date, April 1, 2023.

Required -

1. Compute for the effective interest rate up to three decimal places.

2. Prepare a table of premium amortization first in your ordinary paper, then transfer it to the answer sheet designed for this examination.

3. How much gain(loss) from the 2022 premature retirement will be recognized in the books? Place your answer also in the answer sheet.

Reference no: EM133094993

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