Question

ld 10% plus accrued interest. Interest is receivable every April 1 and October 1.  What amount should Dayrit report as ...


On November 1, 2022, Dayrit Corporation purchased P800,000 face value, 10-year, 8% term bonds dated October 1, 2022 for P700,000 to yield 10% plus accrued interest. Interest is receivable every April 1 and October 1.  What amount should Dayrit report as interest receivable in its December 31, 2022 balance sheet?

 

 

Answer

Interest receivable on the bond is the amount of interest which has been computed on the basis of the stated interest rates on the terms and conditions of the bond means as per the interest rate of the bond and as per the interest due dates of the bond.

Given in the question:

Face value of the bond = P800,000

Bond Issue Date = November 1, 2022

Maturity = 10-Years

Stated Interest Rate = 8%

Bond has been purchased on October 1, 2022 for P700,000 to yield 10% plus accrued Interest

Interest is receivable on every April 1 and October 1

Computation of interest receivable which is to be recorded on December 31, 2022 Balance Sheet

From October 1, 2022 to December 31, 2022 = 03 Months

Note: - Although Dayrit corporation has purchased on November 1, 2022 but has purchased accrued interest as well, that is the reason why October month has also been included in calculation

Accrued Interest = Bond Face Value x Bond Interest Rate x 312

Accrued Interest = P800,000 x 8% x 312

Accrued Interest = P800,000 x 0.08 x 0.25

Accrued Interest = P64,000 x 0.25

Accrued Interest = P16,000

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