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What is the total proceeds from the bond issuance

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Question - Efron Corp. issued P5,000,000 of 10% bonds on January 1, 20x1. The prevailing market rate of interest for similar type of securities was at 12% on the date of issue. The bonds will mature in 10 years. Interests are being paid semi-annually every July 1 and January 1.

The following present value factors are taken from the present value tables: Present value of 1 at 12% for 10 periods 0.32197

Present value of 1 at 6% for 20 periods 0.31180

Present value of an ordinary annuity of 1 at 12% for 10 periods 5.65022

Present value of an ordinary annuity of 1 at 6% for 20 periods 11.46992

1. What is the total proceeds from the bond issuance?

a. 5,000,000

b. 4,458,593

c. 4,426,480

d. 4,442,069

2. What is the interest expense in 20x1?

a. 871,534

b. 600,000

c. 532,113

d. 500,000

3. What is the carrying amount of the bonds as of December 31, 20x1?

a. 4,494,676

b. 4,458,593

c. 4,426,480

d. 4,442,069

Reference no: EM133124274

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