On January 2, 2022, the Peace Company issued P2,000,000 of 9% convertible bonds at par. The bonds will mature in four (4) years on January 1, 2026 with the interest payable annually every January 1. The bond contract entitles the bondholders to receive 8, P100 par value, ordinary shares in exchange for each P1,000 bond. On the date of issue , the prevailing market interest rate for similar debt without the option is 11%. On January 1, 2026, the holders of the bonds with total face value of P1,000,000 exercised their conversion privilege. On that date the bonds were selling at 112 and the ordinary share at P39 per share. Based on the given information and the result of your audit, determine the following (Round off present value factors to four decimal places): The proceeds from issuance of convertible bonds to be allocated to the liability component is? The proceeds from issuance of convertible bonds to be allocated to the equity component is? The carrying amount of the bonds payable on December 31, 2022 is? The interest expense for the year 2023 is? The gain to be recognized on conversion of the bonds is?
On January 2, 2022, the Peace Company issued P2,000,000 of 9% convertible bonds at par. The bonds will mature in four (4) years on January 1, 2026 with the interest payable annually every January 1. The bond contract entitles the bondholders to receive 8, P100 par value, ordinary shares in exchange for each P1,000 bond. On the date of issue , the prevailing market interest rate for similar debt without the option is 11%. On January 1, 2026, the holders of the bonds with total face value of P1,000,000 exercised their conversion privilege. On that date the bonds were selling at 112 and the ordinary share at P39 per share. Based on the given information and the result of your audit, determine the following (Round off present value factors to four decimal places): The proceeds from issuance of convertible bonds to be allocated to the liability component is? The proceeds from issuance of convertible bonds to be allocated to the equity component is? The carrying amount of the bonds payable on December 31, 2022 is? The interest expense for the year 2023 is? The gain to be recognized on conversion of the bonds is?
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 3C
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On January 2, 2022, the Peace Company issued P2,000,000 of 9% convertible bonds at par. The bonds will mature in four (4) years on January 1, 2026 with the interest payable annually every January 1.
The bond contract entitles the bondholders to receive 8, P100 par value, ordinary shares in exchange for each P1,000 bond. On the date of issue , the prevailing market interest rate for similar debt without the option is 11%.
On January 1, 2026, the holders of the bonds with total face value of P1,000,000 exercised their conversion privilege. On that date the bonds were selling at 112 and the ordinary share at P39 per share.
Based on the given information and the result of your audit, determine the following (Round off present value factors to four decimal places):
- The proceeds from issuance of convertible bonds to be allocated to the liability component is?
- The proceeds from issuance of convertible bonds to be allocated to the equity component is?
- The carrying amount of the bonds payable on December 31, 2022 is?
- The interest expense for the year 2023 is?
- The gain to be recognized on conversion of the bonds is?
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