1. On 1 January 2015 ABC Company issued 1000 7% convertible debentures to Company XYZ at par value of P1000 each. The debentures are convertible into 1000 ordinary shares of ABC Company, at the option of the holder (Company XYZ) on 31 December 2019. If not converted the options will be redeemed at par on 31 December 2019 The fair value of the debentures (without the conversion option is P960000 and P983000 on 1 January 2015 and 31 December 2015 respectively. The fair value of the conversion option is P40000 and P37000 on 1 January 2015 and 31 December 2015 respectively Referring to the above transactions from ABC Company books for the year ended 31 December 2015, what is the balance of the Financial Liability?

1. On 1 January 2015 ABC Company issued 1000 7% convertible debentures to Company XYZ at par value of P1000 each. The debentures are convertible into 1000 ordinary shares of ABC Company, at the option of the holder (Company XYZ) on 31 December 2019. If not converted the options will be redeemed at par on 31 December 2019 The fair value of the debentures (without the conversion option is P960000 and P983000 on 1 January 2015 and 31 December 2015 respectively. The fair value of the conversion option is P40000 and P37000 on 1 January 2015 and 31 December 2015 respectively Referring to the above transactions from ABC Company books for the year ended 31 December 2015, what is the balance of the Financial Liability?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter20: Financing With Derivatives

Section: Chapter Questions

Problem 4P

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