On January 1, 2020, Monterey Company issues 100 million unsecured bonds at an issue price 95 cents per unit. Transaction costs, that include underwriting fee, amount to P500,000. The bonds pay interest of 4% at the end of the first year and thereafter interest payment increases at 1% per year. The bond mature on December 31, 2024 are redeemable at the nominal value of P1 each. At the date of issue, Monterey Company has a credit rating of “ABB” and its market interest rate is 7.09%. But due to the imputation of the transaction cost the effective rate of the debt is 7.21%. What is the amortized cost of the debt as of December 31, 2022? On January 1, 2017, Monterey Company issues 100 million unsecurcd bonds at an issue price 95 cents per unit.Transaction costs, that include underwriting fee, amount to P500,000. The bond pay interest of 4% at the end ofthe first year and thereafter interest paymer: increases at 1%% per year. The bond mature on December 31, 2021are redeemable at the nominal value of P'l cach. At the date of issue, Monterey Company has a credit rating of"ABB" and its market interest rate is 7.09%o. But due to the imputation of the transaction cost, the effective rateof the debt is 7.21%.• What is the amortized cost of the deht as of December 31, 2019?4.a. P97.313,462t. P99,329,763c. PI00,491,439d. P100,736.8713715P'age 1 of 2

The amortized cost of debt is determined by discounting the future cash flows from the debt at the…

Answered: On January 1, 2017, Montercy Company…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 1RE

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On January 1, 2020, Monterey Company issues 100 million unsecured bonds at an issue price 95 cents per unit. Transaction costs, that include underwriting fee, amount to P500,000. The bonds pay interest of 4% at the end of the first year and thereafter interest payment increases at 1% per year. The bond mature on December 31, 2024 are redeemable at the nominal value of P1 each. At the date of issue, Monterey Company has a credit rating of “ABB” and its market interest rate is 7.09%. But due to the imputation of the transaction cost the effective rate of the debt is 7.21%. What is the amortized cost of the debt as of December 31, 2022?