Reference no: EM133151368

Question - On January 1, 2017, ABC Corp issued a 3-year, 8,000, Php1,000 convertible bonds at 110. Interest is to be paid annually at the stated coupon rate of 12% every December 31. Each bond is convertible, at the holder's option, into 30, Php25 par value common shares at any time up to maturity. On the date of issuance, prevailing market interest rate for similar debt without the conversion privilege was 9%. 0n the same date, market price of one common share was Php30.

The present value of Php1 at 9% for 3 periods is at 0.7722

The present value of Php1 at 9% ordinary annuity is at 2.5313

Required -

1. What is the equity component of the convertible debt?

2. What is the resulting bonds payable carrying value as of December 31, 2017?

3. Assuming that the convertible bonds were converted on January 1, 2019, how much should be credited to Share Premium from the equity conversion?

4. Assuming that the convertible bonds above were retired at 98 on January 1, 201E?I when the prevailing quoted value of bonds were at 96, how much is the gain or loss to be recognized in the income statement for the retirement?