ACE Company issued 4,000, P1,000 11% bonds maturing after 10 years on January 4, 2020. The Bonds pay interest semiannually on June 30 and December 31. If the current market rate of interest is 12%. 1. What is the initial carrying amount of the bonds on January 4? 2. What is the carrying amount of the bonds on December 31, 2022? 3. Prepare all the necessary journal entries for the year 2020, 2021 and 2022.
ACE Company issued 4,000, P1,000 11% bonds maturing after 10 years on January 4, 2020. The Bonds pay interest semiannually on June 30 and December 31. If the current market rate of interest is 12%. 1. What is the initial carrying amount of the bonds on January 4? 2. What is the carrying amount of the bonds on December 31, 2022? 3. Prepare all the necessary journal entries for the year 2020, 2021 and 2022.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Debenture Valuation
A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.
Note Valuation
It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:
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