Initial Measurement @ Fair Value Less directly attributable cost Fair Value is equal to the Present Value of the future cash payments to settle the bond Bond issue cost is direct expense if through pnl Subsequent measurement @ Amortized cost or pnl Sample March 1 2020 Sold P5,000,000.00 bond @ its face amount Interest is 12% payable semi annually every Mar1 and Sept1 Mar1 2020 Cash 5,000,000.00 BP Sept1 2020 Interest Exp Dec31 2020 Interest Exp 5,000,000.00 300,000.00 Cash 300,000.00 200,000.00 Interest Payable 200,000.00 Mar1 2021 Interest Exp Interest Pay 100,000.00 Cash 300,000.00 June 1 2020 Sold P5,000,000.00 bond @ 97 Interest is 12% payable semi annually June1 and Dec1 Mature in 5 years June1 2020 Cash Discount on Bonds 4,850,000.00 150,000.00 BP Dec1 2020 Interest Exp 5,000,000.00 300,000.00 Cash Dec31 2020 Interest Exp Dec31 2020 Interest Exp 300,000.00 50,000.00 Interest Payable 50,000.00 17,500.00 Discount on BP 17,500.00 June1 2021 Interest Exp Interest Pay 250,000.00 50,000.00 Cash 300,000.00 April 1 2020 Sold P5,000,000.00 bond @ P5,228,000.00 plus accrud interest Dated Jan 1 2020 Interest is 12% payable semi annually Jan1 and Jul1 Mature in 5 years April1 2020 Cash July1 2020 Dec31 2020 5,378,000.00 Accrued Int Payable Premium on BP Bonds Payable Interest Expense Interest Exp Premium on BP Jan1 2021 150,000.00 228,000.00 5,000,000.00 300,000.00 Cash 300,000.00 300,000.00 Interest Payable 300,000.00 36,000.00 Interest Expense 36,000.00 Interest Payable 300,000.00 Cash 300,000.00