Reference no: EM132995728

On January 1, 2020, Joy Company issued 8,000 P1,000 convertible bonds at 106. The stated interest of 10% is payable every yearend for five years. Each bond is convertible into 50 ordinary shares with a par value of P20. The market rate of interest for the bonds without the conversion privilege is 9%.

• On December 31, 2021, after the interests are paid, half of the bonds were converted.
• On December 31, 2022, half of the remaining bonds were retired by virtue of an asset swap. The property which had a carrying amount of P1,570,000. Its fair value of P2,050,000 approximated the fair value of the bonds with conversion privilege. The bonds had a fair value of 101 without the conversion privilege. (U se 4 decimal for PV)

Problem 1: How much is the equity component arising from the issuance of convertible bonds?

Problem 2: How much is the interest expense for 2020?

Problem 3: How much is the carrying amount of the bonds as of December 31, 2021?

Problem 4: How much is Share Premium arising from the issuance from conversion of bonds?

Problem 5: How much is the premium amortization during 2022?

Problem 6: How much is the net gain or loss on the asset swap? [Indicate whether it is a gain or loss]

Problem 7: How much equity component should be transferred to the Share Premium - Issuance account on December 31, 2022?