COLLABORATIVE TASK

On January 1, 2X19, ABC issued 9% bonds with a face value of P500,000 for P469,280 to yield 10%. The
bonds date is the same as its issuance date. It pays interest annually.

Using the given information, answer the following items:

1. What is the amount of discount on the issuance date?

2. Prepare the journal entries to record interest expense on December 31, 2X19.

Answers:

1. P 45,000

Solution:

¿ 500,000 ×9 %
¿ 45,000
Cash P 455,000
Discount on Bonds Payable 45,000
Bonds Payable 500,000

2. Journal entries of interest expense for Dec 31, 2X19

Interest Expense P 3,910.67

Cash 3,910.67
¿ 469,280 ×10 % ÷12
¿ P 3,910.67