Determine the increase in share premium from issuance

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Question - On January 1, 2020, a company issued 10% convertible 8-year bonds with a face value of P6,000,000 at 97. Each P2,000 bond can be converted into 10 ordinary shares with a par value of P100.

On the same date, similar debts without the conversion feature can be sold at an issue price reflecting a market rate of interest of 12%. Interest on the bonds is payable annually every December 31.

On March 1, 2021, conversion on 40% of the bonds was exercised. The company also incurred costs in the conversion amounting to P100,000 which were paid in cash. Accrued interest was also paid in cash.

Determine the increase in share premium from issuance as a result of the conversion. Round present value factors to four decimals.

Reference no: EM132967856

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