Question

On November 1, 2022, Dayrit Corporation purchased P800,000 face value, 10-year, 8% term bonds dated October 1, 2022 for ...


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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

The bonds are issued by a company in order to fulfill its financial needs. These are classified as long-term liabilities and carry a certain percentage of interest. However, the bonds can also be zero interest are issued without any coupon rate.

Calculation of interest receivable:

Interest Receivable=Face Value of Bonds×Coupon Rate×Time Period                                  =P800,000×8%×312                                  =P16,000

The interest receivable on December 31, 2022 balance sheet is P16,000.

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