On January 1, 2022, Evening Star Corp. issued P5,000,000 of 12% bonds for P6,066,340 due December 31, 2028. Bond issue cost of P25,000 were incurred. Interest on the bonds is payable annually every December 31 starting December 31, 2022.
The effective interest rate was determined to be 8% after considering the bond issue cost.
The bonds are callable at 120 and on December 31, 2025, after the settlement of the 2025 interest, the entity called P2,000,000 face amount of the bonds and retired them.
How much is the interest expense for the year 2023?
a. 463,890
c. 483,307
b. 473,972
d. 600,000