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What amount of interest expense should be recognized

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On January 1, 2020, Shancey Corporation purchased an equipment with a cash price of P2,000,000. The supplier can choose how the purchase is to be settled. The choices are 20,000 shares with par value of P50 in one year's time, or a cash payment equal to the market value of 15,000 phantom shares on December 31, 2020. At grant date on January 1, 2020, the market price of each share is P80 and on the date of settlement on December 31, 2020, the market price of each share is P100.

Question A. What is the equity component arising from the purchase of equipment with share and cash alternative?

Question B. What amount of interest expense should be recognized on December 31, 2020 if the supplier has chosen the cash alternative?

Question C. What amount should be recognized as share premium on December 31, 2020 if the supplier has chosen the share alternative?

Reference no: EM132723963

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