Reference no: EM132912678

When BLACKPINK COMPANY was expanding its metal window division, it did not have enough capital to finance the expansion. So, management sought and received approval from the board of directors to issue bonds. The company planned to issue P5,000,000 of 8 percent, fiveyear bonds in 2018. Interest would be paid on June 30 and December 31 of each year.

• The bonds would be callable at 104, and each P1,000 bond would be convertible into 30 shares of P10 par value common stock. On January 1, 2018, the bonds were sold at 96 because the market rate of interest for similar investment was 9 percent. The company decided to amortize the bond discount by using the effective interest method.
• On July 1, 2020, management called and retired half the bonds, and investors converted the other half into common stock. As inducement, the company agrees to pay additional P100,000 to the holders of the convertible bonds.

Problem a: Based on the above, determine the following:

1. Carrying value of the bonds at December 31, 2018
2. Carrying value of the bonds at December 31, 2019
3. Carrying value of the bonds converted
4. Carrying value of the retired bonds