Reference no: EM132912689
On January 1, 2020, CHAEYOUNG LTD. issued 2,000 of its 5 -year, P1,000 face value, 11% bonds dated January 1 at an effective annual interest rate of 9%. Interest is payable each December 31. CHAEYOUNG uses the effective interest method of amortization. On December 31, 2021, the 2,000 bonds were extinguished early through acquisition in the open market by CHAEYOUNG for P1,980,000 plus accrued interest.
- On July 1, 2020, CHAEYOUN issued 5,000 of its 6-year, P1,000 face value, 10% convertible bonds at par. Interest are payable every June 30 and December 31. On the date of issue, the prevailing market interest rate for similar debt without the conversion option is 12%. On July 1, 2021, an investor in CHAEYOUNG's convertible bonds tendered 1,500 bonds for conversion into 15,000 ordinary shares of CHAEYOUNG, which had a fair value of P105 and a par value of P1 at the date of conversion.
Problem a: Based on the above, determine the following:
1. The issue price of the 2,000 5-year, P1,000 face value bonds on January 1, 2020.
2. The carrying amount of the 2,000, 5-year, P1,000 face value bonds on December 31, 2020.
3. The gain on early retirement of bonds on December 31, 2021.
4. The issuance of the 6-year, P1,000 face value bonds on July 1, 2020, increased equity by how much?
5. The conversion of the 1,500 6-year, P1,000 face value bonds on July 1, 2021, increased share premium by how much?
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