Reference no: EM132916220
Question - Separated Company issued a P 5,000,000, 10%, 5-year bond for P 6,000,000.
The bond is convertible into 50,000 shares with P 100 par value. Without the conversion option, the bond can be sold at P 5,399,271.
A. After 1 year, 20% of the bonds were converted to shares.
B. After 2 years, 20% of the bond balance were paid by an equipment with a carrying value of P 1,000,000 and a fair value of P 900,000.
C. After 3 years, 20% of the bond balance were issued by the company's ordinary P 100 par, with market value of P 130 per share. The liability has a market value of 102.
D. After 4 years, the balance of the bond were restructured by a new bond of P 2,000,000, 12% and will be due for the next 5 years.
Required -
a. How much is the interest expense in the second year?
b. How much is the interest expense in year 3?
c. How much is the gain or loss in bond extinguishment in year 2?
d. How much is the initial balance of the premium on bonds?
e. On the conversion after one year, how much is the premium on capital share created?
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