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Prepare the journal entries necessary to record issue

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Question - Foreman Corporation issued P800, 000 of 10% 20 year bonds on January 1, 2019, at P102. Interest is payable semi-annually on July 1 and January 1. Foreman Company uses the straight line method of amortization for bond premium or discount.

Assume the same information ABOVE, except that Foreman uses the effective interest method of amortization for bond premium or discount. Assume an effective yield of 9.7705%

Instructions: Prepare the journal entries to record the following:

(a) The issuance of the bonds

(b) The payment of interest and the related amortization on July 1, 2019

(c) The accrual of interest and the related amortization on December 31, 2019.

CityMall Inc had an outstanding P5, 000,000 of 11% bonds (interest payable July 31 and January 31) due in 10 years. On July 1, it issued P7, 000,000 of the 10% 15 year bonds (interest payable July 1 and January 1) at P98. A portion of the proceeds was used to call the 11% bonds at P102 on August 1. Unamortized bond discount and issue cost applicable to the 11% bonds were P120, 000 and P300, 000, respectively.

Instructions: Prepare the journal entries necessary to record issue of the new bonds and the refunding of the bonds.

Reference no: EM132736691

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