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How much should be recorded as share premium

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Question - On Jan. 1, 2021, GO Corporation issued P7,500,000 face amount, 5-year bonds at 111. Each P1,000 bond was issued with 50 detachable share warrants, each of which entitled the bondholder to purchase one ordinary share of P5 par value at P30. Immediately after issuance, the market value of each warrant was P10.

The stated interest rate on the bonds is 11% payable annually every Dec. 31. However, the prevailing market rate of interest for similar bonds without warrants is 12%. The present value of 1 at 12% for 5 periods is 0.57 and the present value of an ordinary annuity of 1 at 12% for 5 periods is 3.60.

How much should be reported as equity component arising from the issuance of bonds payable?

How much should be recorded as share premium if all of the warrants are exercised?

Reference no: EM133070771

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