On January 1, 2019, COT Co. issued P1,500,000, 12% convertible bonds due after 4 years. The bonds were sold for P1,595,082 and are convertible into P10 par ordinary shares at a conversion price of P25 per share. On December 31, 2020, COT Co. in an effort to induce conversion of the bonds into ordinary share, reduced the conversion price to P20 per share for bondholders that converted within 40 days. On this date, the fair value of the bonds is P1,600,000 and the bonds have a carrying amount of P1,552,049.
On January 1, 2019, COT Co. issued P1,500,000, 12% convertible bonds due after 4 years. The bonds were sold for P1,595,082 and are convertible into P10 par ordinary shares at a conversion price of P25 per share. On December 31, 2020, COT Co. in an effort to induce conversion of the bonds into ordinary share, reduced the conversion price to P20 per share for bondholders that converted within 40 days. On this date, the fair value of the bonds is P1,600,000 and the bonds have a carrying amount of P1,552,049.
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
Chapter15: Contributed Capital
Section: Chapter Questions
Problem 5MC
Related questions
Question
On January 1, 2019, COT Co. issued P1,500,000, 12% convertible bonds
due after 4 years. The bonds were sold for P1,595,082 and are convertible
into P10 par ordinary shares at a conversion price of P25 per share.
On December 31, 2020, COT Co. in an effort to induce conversion of the
bonds into ordinary share, reduced the conversion price to P20 per share
for bondholders that converted within 40 days. On this date, the fair
of the bonds is P1,600,000 and the bonds have a carrying amount of
P1,552,049.
All the bond holders accepted the offer on December 31, 2020. On the date
of conversion, the fair value of the COT Co.'s ordinary share is P30 per share.
How much is the amount to be recognized in profit or loss as a result inducedc onversion?
Transcribed Image Text:On January 1, 2019, COT Co. İssued P1,500,000, 12% convertible bonds
|due after 4 years. The bonds were sold for P1,595,082 and are convertible
into P10 par ordinary shares at a conversion price of P25 per share.
On December 31, 2020, COT Co. in an effort to induce conversion of the
bonds into ordinary share, reduced the conversion price to P20 per share
for bondholders that converted within 40 days. On this date, the fair value
of the bonds is P1,600,000 and the bonds have a carrying amount of
P1,552,049.
All the bond holders accepted the offer on December 31, 2020. On the date
of conversion, the fair value of the COT Co.'s ordinary share is P30 per share.
How much is the amount to be recognized in profit or loss as a result induced
conversion?
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