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What was the prevailing market rate when the bond was issued

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Question 1 - On January 1, 2011, Boyle Company issued 9% bonds in the face amount of P5,000,000 which mature on Janaury 1, 2021. The bonds pay interest on an annual basis. Boyle received P4,411,076.80 upon issuance. What was the prevailing market rate when the bond was issued?

Question 2 - The long-term debt section of Holt Company's statement of financial position on December 31, 2010 included a 5-year 7% bonds payable of P3,000,000 less unamortized discount of P111,529.97. Further examination revealed that these bonds were issued to yield 6% (before bond issue costs). The amortization of bond discount was recorded using the effective interest method. Interest was paid on January 1 and July 1 of each year. If the bonds were issued on July 1, 2010?

a. What is the effective interest rate used?

b. How much bond issue costs were incurred on July 1, 2010?

c. How much was interest expense for 2010?

d. How much interest was paid as of December 31, 2010?

Reference no: EM133171250

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