Problem 1

Junerey Company was authorized to issue 12%, 10-year bonds with face amount of P7,000,000 on April
1, 2020. Interest on the bonds is payable semiannually on April 1 and October 1 of each year.

The bonds were sold to underwriters on April 1, 2020 at 106. The entity amortizes discount or premium
only at the end of the fiscal year, using the straight line method.

Required:
1. Prepare journal entries for 2020 and 2021 including adjustments at the end of each year.
2. Compute the carrying amount of bonds payable as of December 31, 2020 and December 31, 2021.

Problem 2
Interlink Company was authorized to issue 10-year, 12% bonds with face amount of P8,000,000. The
bonds are dated January 1, 2020, and interest is payable semiannually on June 30 and December 31. The
bonds were sold as follows:

January 1, 2020 5,000,000 at 95

September 1, 2021 2,000,000 at 103 plus accrued interest

Required:
1. Prepare journal entries for 2020 and 2021 including adjustments at the end of each year. Using
Journal entry method.
2. Compute the carrying amount of bonds payable as of December 31, 2020 and December 31, 2021.
The bond discount or premium will amortized using straight line method.

Problem 3
Marbel Company was authorized to issue 12% bonds with face amount of P5,000,000 on April 1, 2020.
Interest on bonds is payable semiannually on April 1 and October 1. Bonds matures on April 1, 2025.

The entire issue sold on April 1, 2020, at 98 less bond issue cost of P50,000. On July 1, 2021, bonds of
P2,000,000 face amount were purchased and retired at 99 plus accrued interest.

1. Prepare journal entries for 2020 and 2021 including adjustments at the end of each year. Using
Journal entry method.
2. Compute the carrying amount of bonds payable as of December 31, 2020 and December 31, 2021.
The bond discount or premium will amortized using straight line method.

Problem 4
Yellow Company received permission on January 1, 2020 to issue 12% bonds with face amount of
P6,000,000 maturing on January 1, 2030. Interest is payable annually on December 31. The bonds are
callable at 102 plus accrued interest.
On January 1, 2020, the entity issued the bonds for P6,737,000 with an effective yield of 10%. The fiscal
year of the entity ends December 31. The effective interest amortization is used.

Required:
1. Prepare journal entries relating to the bonds for 2020 and 2021
2. Present the bonds payable on December 31, 2020