Reference no: EM132887666

On January 1, 2020, Wizards Co. issued 2,000 of its 5-year, P1,000 face value, 11% bonds dated January 1 at an effective annual interest rate (yield) of 9%. Interest is payable each December 31. The entity uses the effective interest method of amortization. On December 31, 2021, the 2,000 bonds were extinguished early through acquisition in the open market for P1,980,000 plus accrued interest.

On July 1, 2020, Wizards Co. issued 5,000 of its 6-year, P1,000 face value, 10% convertible bonds at par. Interest is 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 the entity's convertible bonds tendered 1,500 bonds for conversion into 15,000 shares of the entity's ordinary shares, which had a fair value of P105 and a par value of P1 at the date of conversion.

Question 1: How much is the gain (loss) on early retirement of bonds?

Question 2: How much is the total interest expense for the year ended December 31, 2021?

Question 3: How much is net increase in shareholders' equity as a result of the conversion?

Question 4: How much is the carrying value of the bonds payable account as of December 31, 2021?