On January 1, 2020, ABC Company issued its 10%, 5-year, P3,000,000 convertible bonds for the face amount of P3,000,000. The bonds are convertible into P400 par ordinary shares at a conversion price of P500 per share. The prevailing interest rate of the bonds without the conversion option is 12%. Interest is payable every December 31. On December 31, 2021, after payment of interest, one-half of the bonds were retired at P1,600,000 when the fair value of the securities is P500. The prevailing interest rate of the bonds is 9%. On January 1, 2022, to induce the holder to convert the convertible debenture promptly, ABC Company reduces the conversion price to P400 if the debenture is converted before March 1, 2022 (i.e., within 60 days). All the bond holders accepted the offer on January 1, 2022. On the date of conversion, the fair value of ABC Company’s ordinary share is P420 per share. 1.The net increase or (decrease) in equity as a result of the retirement of the bonds on December 31, 2021 is 2.The interest expense in 2021 is
On January 1, 2020, ABC Company issued its 10%, 5-year, P3,000,000 convertible bonds for the face amount of P3,000,000. The bonds are convertible into P400 par ordinary shares at a conversion price of P500 per share. The prevailing interest rate of the bonds without the conversion option is 12%. Interest is payable every December 31. On December 31, 2021, after payment of interest, one-half of the bonds were retired at P1,600,000 when the fair value of the securities is P500. The prevailing interest rate of the bonds is 9%. On January 1, 2022, to induce the holder to convert the convertible debenture promptly, ABC Company reduces the conversion price to P400 if the debenture is converted before March 1, 2022 (i.e., within 60 days). All the bond holders accepted the offer on January 1, 2022. On the date of conversion, the fair value of ABC Company’s ordinary share is P420 per share.
1.The net increase or (decrease) in equity as a result of the retirement of the bonds on December 31, 2021 is
2.The interest expense in 2021 is
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