On January 1, 2006, 

Naruto Company issued its 9% bonds in face amount of P4,000,000,

which mature on January 1, 2016.  The bonds were issued for P3,756,000 to yield 10%,
resulting in bond discount of P244,000.  Naruto uses the interest method of amortizing
bond discount.  Interest is payable annually on December 31.  At December 31,
2006, Naruto’s unamortized bond discount should be

On January 1, 2011, Ward Corporation issued it 9% bonds in face amount of P4,000,000, which
mature on January 1, 2021. The bonds were issued for P3,756,000 to yield 10%, resulting in
bond discount ofP244,000. Ward uses the interest method of amortizing bond discount. Interest
is payable annually on December 31. At December 2011
, Ward’s unamortized bond discount should be
a.228,400 b. 208,000 c. 206,440 d. 204,000
A 3,756,000X1.1-360,000=3,771,600; 4,000,000-3,771,600=228,400
On January 1, 2006, Naruto Company issued 5,000 of its 9%, P1,000 face value bonds at
95.  Interest is payable semiannually on July 1 and January 1.  The bonds mature on
January 1, 2016.  Naruto uses the straight line method of amortizing bond discount.  On
Naruto’s December 31, 2006 balance sheet, how much would be shown as the carrying
amount of the bonds payable?

On January 1, 2006, Okon Company issued 5,000 of its 9%, P1,000 face value bonds at 95.
Interest is payable semiannually on July 1 and January 1. The bonds mature on January 1,
2016. Okon uses the straight line method of amortizing bond discount. On Okon’s December
31, 2006 balance sheet, how much would be shown as the carrying amount of the bonds
payable
4,775,000

At year-end, Fort Company issued

5,000 of 8%, 10-year, P1,000 face
value bonds with detachable share
warrants at 110. Each bond carried
a detachable warrant for ten
ordinary shares of Fort Company
at a
specified option price of P25 per
share. The par value of the
ordinary share is P20.
Immediately after issuance, the
market value of the bonds without
the warrants was P5,400,000 and
the
market value of the warrants was
P600,000.
What is the carrying amount of
bonds payable at year-end?
At year-end, Fort Company issued
5,000 of 8%, 10-year, P1,000 face
value bonds with detachable share
warrants at 110. Each bond carried
a detachable warrant for ten
ordinary shares of Fort Company
at a
specified option price of P25 per
share. The par value of the
ordinary share is P20.
Immediately after issuance, the
market value of the bonds without
the warrants was P5,400,000 and
the
market value of the warrants was
P600,000.
What is the carrying amount of
bonds payable at year-end?
On January 1, 2006, Naruto Company issued its 10% bonds in the face amount of
P5,000,000, which mature on January 1, 2016. The bonds were issued for P5,675,000 to
yield 8%, resulting in bond premium of P675,000.  Naruto uses the interest method of
amortizing bond premium.  Interest is payable annually on December 31.  At December
31, 2006, Naruto’s adjusted unamortized bond premium should be
On January 1, 2006, Wolf Company issued its 10% bonds in the face amount of P5,000,000,
which mature on January 1, 2016. The bonds were issued for P5,675,000 to yield 8%, resulting
in bond premium of P675,000. Wolf uses the interest method of amortizing bond premium.
Interest is payable annually on December 31. At December 31, 2006, Wolf’s adjusted
unamortized bond premium should be

629,000
On November 1, 2006, Naruto Company issued P8,000,000 of its 10-year, 8% term bonds
dated October 1, 2006.  The bonds were sold to yield 10% with total proceeds of
P7,000,000 plus accrued interest.  Interest is paid every April 1 and October 1.  What
should reported as interest payable in its December 31, 2006 balance sheet?

On November 1, 20x5, Mason Corp. issued $800,000 of its 10-year, 8% term bonds
dated October 1, 20x5. The bonds were sold to yield 10%, with total proceeds of
$700,000 plus accrued interest. Interest is paid every April 1 and October 1. What
amount should Mason report for interest payable in its December 31, 20x5 balance
sheet?

 $16,000

One month of accrued interest was collected from the bondholders at issuance
for the period October 1 - November 1, and interest for the next two months to
December 31 was accrued.
Total accrued interest is $16,000 = $800,000(.08)(3/12)

On November 1, 2006, Mason Company issued P8,000,000 of its 10-year, 8% term bonds
dated October 1, 2006. The bonds were sold to yield 10% with total proceeds of P7,000,000
plus accrued interest. Interest is paid every April 1 and October 1. What should Mason report for
interest payable in its December 31, 2006 balance sheet?
160,000
On June 30, 2006, Naruto Company had outstanding 9%, P5,000,000 face value bonds
maturing on June 30, 2011.  Interest is payable semiannually every June 30 and
December 31.  On June 30, 2006, after amortization was recorded for the period, the
unamortized bond premium and bond issue cost were P30,000 and P50,000,
respectively.  On that date, Naruto acquired all its outstanding bonds on the open market
at 98 and retired them.  At June 30, 2006, what amount should Naruto recognize as gain
before income tax on redemption of bonds?
80,000
On June 30, 2006, King Company had outstanding 9%, P5,000,000 face value bonds maturing
on June 30, 2011. Interest is payable semiannually every June 30 and December 31. On June
30, 2006, after amortization was recorded for the period, the unamortized bond premium and
bond issue cost were P30,000 and P50,000, respectively. On that date, King acquired all its
outstanding bonds on the open market at 98 and retired them. At June 30, 2006, what amount
should King recognize as gain before income tax on redemption of bonds?

On April 1, 2006, Naruto Company issued at 99 plus accrued interest, 2,000 of its 8%
P1,000 face value bonds.  The bonds are dated January 1, 2006, mature on January 1,
2016, and pay interest on July 1 and January 1.  Naruto paid bond issue cost of
P70,000.  From the bond issuance, Naruto received net cash of

On April 1, 2021, This Company

issued at 99 plus accrued interest,
2,000 of 8% P1,000 face value
bonds.
The bonds are dated January 1,
2021, mature on January 1, 2031,
and pay interest on January 1 and
July1. The entity paid bond issue
cost of P70,000. From the bond
issuance, what is the net cash
received?
Answer: 1950000
On April 1, 2021, This Company
issued at 99 plus accrued interest,
2,000 of 8% P1,000 face value
bonds.
The bonds are dated January 1,
2021, mature on January 1, 2031,
and pay interest on January 1 and
July1. The entity paid bond issue
cost of P70,000. From the bond
issuance, what is the net cash
received?
Answer: 1950000
1,950,000

On April 1, 2004, Greg corporation issued at 99 plus accrued interest, 2,000 of its 8% P1,000
bonds.  The bonds are dated January 1, 2004, mature on January 1, 2014, and pay interest on
July 1 and January 1.  Greg paid bond issue cost of P110,000.  From the bond issuance, Greg
received net cash of
Issue price ( 2,000,000 x 99%) P 1,980,000
Accrued interest from January 1 to april 1
(2,000,000 x 8% x 3/12) 40,000
Total 2,020,000
Less: bond issue cost 70,000
Net cash received 1,950,000

Naruto Company showed the following balances in connection with its noncurrent
liabilities on December 31, 2005.
Bonds payable – 12%, maturing December 31, 2015                    P5,000,000
Bonds payable – 14%, maturing December 31, 2010                      4,000,000
Premium on bonds payable                                                           600,000
Discount on bonds payable                                                           200,000
Bond issue cost                                                                            60,000
The premium is related to the 12% bonds payable and the discount and bond issue cost
are applicable to the 14% bonds payable; No bonds were retired during 2006.  The
company uses the straight line method of amortization.  How much interest expense
on the bonds payable should Naruto report in its 2006 income statement?
1,152,000

On January 1, 2006, Naruto Company issued its 10% bonds in the face amount of P1,000,000
that mature on January 1, 2016. The bonds were issued for P886,000 to yield 12%, resulting in
bond discount of P114,000.  Naruto uses the interest method of amortizing bond
discount.  Interest is payable July and January 1.  For the year ended December 31, 2006,
Naruto should report bond interest expense at 106 510

On November 1, 2006, Naruto Company issued P8,000,000 of its 10-year, 8% term bonds
dated October 1, 2006.  The bonds were sold to yield 10% with total proceeds of
P7,000,000 plus accrued interest.  Interest is paid every April 1 and October 1.  What
should reported as interest payable in its December 31, 2006 balance sheet?
Accrued interest from October 1 to December 31
( 8,000,000 x 8% x 3/12) 160,000

On July 1, 2000, Naruto Company issued of its 9%, P1,000 face value callable bonds for
P3,840,000.  The bonds are dated July 1, 2000 and mature on July 1, 2010.  Interest is
payable semiannually on January 1 and July 1.  Naruto uses the straight-line method of
amortizing bond discount.  The bonds can be called by the issuer at 101 at any time after
June 30, 2005.  On July 1, 2006, Naruto called in all of the bonds and retired them.  Before
income tax, how much loss should Naruto report on this early extinguishment of debt for
the year ended December 31, 2006?

On July 1, 2000, Flax Company issued of its 9%, P1,000 face value callable bonds for
P3,840,000. The bonds are dated July 1, 2000 and mature on July 1, 2010. Interest is payable
semiannually on January 1 and July 1. Flax uses the straight-line method of amortizing bond
discount. The bonds can be called by the issuer at 101 at any time after June 30, 2005. On July
1, 2006, Flax called in all of the bonds and retired them. Before income tax, how much loss
should Flax report on this early extinguishment of debt for the year ended December 31, 2006?

104,000