PROBLEM 6-5

1.

Interest expense for 2021 (₱3,805,600 x 10%)   ₱ 380,560

Interest paid for 2021   320,000
Discount amortization   ₱ 60,560
   
Bonds payable   ₱ 4,000,000
Issue price - proceeds from issuance   3,805,600
Discount on bonds payable - 12/31/2020   ₱ 194,400
Amortization for 2021   60,560
Discount on bonds payable - 12/31/2021   ₱ 133,840
     
Bonds payable   ₱ 4,000,000
Payment on 12/31/2021   800,000
Bonds payable - 12/31/2021   ₱ 3,200,000
Discount on bonds payable   133,840
Carrying amount - 12/31/2021   ₱ 3,066,160

2.

Cash ₱ 3,805,600  
Discount on bonds payable ₱ 194,400  
Bonds payable   ₱ 4,000,000
Interest expense ₱ 320,000  
Cash   ₱ 320,000
Interest expense ₱ 60,560  
Discount on bonds payable   ₱ 60,560
Bonds payable ₱ 800,000  
Cash   ₱ 800,000

Additional Questions

Requirement 1
   
Bonds payable   ₱4,000,000
Payment on 12/31/2021   800,000
Bonds payable - 12/31/2021   ₱3,200,000
Discount on bonds payable   (64,800)
Carrying amount - 12/31/2021   ₱3,135,200
 Year Bonds outstanding Fraction Discount amortization
2021 ₱4,000,000 40/120 ₱64,800
2022 ₱3,200,000 32/120 ₱51,840
2023 ₱2,400,000 24/120 ₱38,880
2024 ₱1,600,000 16/120 ₱25,920
2025 ₱800,000 8/120 ₱12,960
₱12,000,000 ₱194,400

Requirement 2

1. Cash ₱ 3,805,600  
Discount on bonds payable ₱ 194,400  
Bonds payable   ₱ 4,000,000
2. Interest expense ₱ 320,000  
Cash   ₱ 320,000
3. Interest expense ₱ 64,800  
Discount on bonds payable   ₱ 64,800
4. Bonds payable ₱ 800,000  
Cash   ₱ 800,000

PROBLEM 6-10

1.

PV of principal (₱7,000,000 x .456)   ₱3,192,000

PV of interest (₱350,000 x 13.59)   4,756,500
Total issue price   ₱7,948,500

2.

Date Interest paid Interest expense Premium amortization Carrying amount

03/01/2020       ₱7,948,500
09/01/2020 ₱350,000 ₱317,940 ₱32,060 ₱7,916,440
03/01/2021 ₱350,000 ₱316,658 ₱33,342 ₱7,883,098

3.
2020      
Mar 1 Cash ₱ 7,948,500  
  Bonds payable   ₱ 7,000,000
  Premium on bonds payable   ₱ 948,500
Sept. 1 Interest expense ₱ 317,940  
  Premium on bonds payable ₱ 32,060  
  Cash   ₱ 350,000
Dec. 31 Interest expense ₱ 233,333  
  Accrued interest payable (₱7,000,000 x 10% x   ₱ 233,333
4/12)
  Premium on bonds payable ₱ 22,228  
  Interest expense (₱33,342 x 4/6)   ₱ 22,228