Each P1,000 bond was issued with 20 detachable share warrants, each of which entitled the bondholder to purchase one share of P5 par ordinary share at P25. At time of issuance, there was no available market value for the warrant. The stated interest rate on the bonds is 11% payable annually every September 30. However, the prevailing market rate of interest for similar bonds without warrants is 12%. The present value of 1 at 12% for 5 periods is 0.57 and the present value of an ordinary annuity of 1 at 12% for 5 periods is 3.60. ChowFan Company's accounting year ends on December 31. On September 30, 2020, what amount should ChowFan record as discount or premium on bonds payable? * O P170,000 discount O P170,000 premium O P400,000 discount O P400,000 premium
Each P1,000 bond was issued with 20 detachable share warrants, each of which entitled the bondholder to purchase one share of P5 par ordinary share at P25. At time of issuance, there was no available market value for the warrant. The stated interest rate on the bonds is 11% payable annually every September 30. However, the prevailing market rate of interest for similar bonds without warrants is 12%. The present value of 1 at 12% for 5 periods is 0.57 and the present value of an ordinary annuity of 1 at 12% for 5 periods is 3.60. ChowFan Company's accounting year ends on December 31. On September 30, 2020, what amount should ChowFan record as discount or premium on bonds payable? * O P170,000 discount O P170,000 premium O P400,000 discount O P400,000 premium
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
Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable
Section: Chapter Questions
Problem 7C
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