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How much is the gain or loss on extinguishment

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Question - On January 1, 2020, Gwapo Company issued 12%, 5-year, P5,000,000 bonds for 98 less bond issue cost of P50,000. Principal is payable upon maturity while interest is due annually.

On July 31, 2022, the bonds were retired at 99 plus accrued interest.

Required -

Prepare the necessary journal entries from the issuance of the bonds on January 1, 2020 up to its retirement on July 31, 2022.  

What is the effective interest rate?

What was the carrying amount of the bonds on its retirement date, July 31, 2022?

How much is the gain or loss on extinguishment?

Reference no: EM132915434

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