On January 1, 2020 Patrice Company issued P10 million bonds that will mature in five years. The bond indenture requires Patrick to establish a sinking fund for the retirement of these bonds, with annual deposit every January 1, starting January 1, 2020 up to January 1, 2020 in time for the maturity of the bonds. The fund is to be placed in a separate account to be maintained in the company's depository bank. Using an average annual interest rate of 10% (net of tax) expected to be earned on this investment, the company determined that the required annual deposit to be able to accumulate a total of P10 million is P1,489,070.20. How much is the bond sinking fund balance at December 31, 2020 after making the required year-end adjustment in the fund? A. P1,489,070.20 B. P1,637,977.22 C. P1,629,842.80 D. P3,127,047.42
On January 1, 2020 Patrice Company issued P10 million bonds that will mature in five years. The bond indenture requires Patrick to establish a sinking fund for the retirement of these bonds, with annual deposit every January 1, starting January 1, 2020 up to January 1, 2020 in time for the maturity of the bonds. The fund is to be placed in a separate account to be maintained in the company's depository bank. Using an average annual interest rate of 10% (net of tax) expected to be earned on this investment, the company determined that the required annual deposit to be able to accumulate a total of P10 million is P1,489,070.20. How much is the bond sinking fund balance at December 31, 2020 after making the required year-end adjustment in the fund? A. P1,489,070.20 B. P1,637,977.22 C. P1,629,842.80 D. P3,127,047.42
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 20P
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On January 1, 2020 Patrice Company issued P10 million bonds that will mature in five years. The bond indenture requires Patrick to establish a sinking fund for the retirement of these bonds, with annual deposit every January 1, starting January 1, 2020 up to January 1, 2020 in time for the maturity of the bonds.
The fund is to be placed in a separate account to be maintained in the company's depository bank. Using an average annual interest rate of 10% (net of tax) expected to be earned on this investment, the company determined that the required annual deposit to be able to accumulate a total of P10 million is P1,489,070.20.
How much is the bond sinking fund balance at December 31, 2020 after making the
required year-end adjustment in the fund?
The fund is to be placed in a separate account to be maintained in the company's depository bank. Using an average annual interest rate of 10% (net of tax) expected to be earned on this investment, the company determined that the required annual deposit to be able to accumulate a total of P10 million is P1,489,070.20.
How much is the bond sinking fund balance at December 31, 2020 after making the
required year-end adjustment in the fund?
A. P1,489,070.20
B. P1,637,977.22
C. P1,629,842.80
D. P3,127,047.42
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