31 to 37 are based on the following: On January 1, 2020, ABC Co. issued P3,000,000 face value, 12%, 5-year bonds at a price that will yield 9%. Underwriting, legal, and regulatory fees incurred amounted to P100,000. The bonds are dated January 1, 2020, and pay interest annually on December 31st.
In 2021, ABC Co. reacquired and retired P1,000,000 face value bonds at 102% excluding accrued interest. The prevailing market rate of interest was as follows: December 31, 2020 - 11%; December 31, 2021 - 10% (Note: Use the whole PV factor and round off all computations to the nearest peso.)
Required: Give the journal entry on:
31. January 1, 2020, to record the issuance of bonds.
32. January 1, 2020, to record bond issue cost.
33. December 31, 2020, to record the payment of interest.
34. December 31, 2020, to record the change in fair value.
35. April 1, 2021, to record the retirement of P1,000,000 face value bonds.
36. December 31, 2021, to record the payment of interest.
37. December 31, 2021, to record the change in fair value.
Chart of Accounts:
A. Cash
B. Bonds Payable
C. Transaction costs
D. Interest Expense
E. Gain from change in fair value
F. Gain from extinguishment of debt
G. Loss from change in fair value
H. Loss from extinguishment of debt
