What amount should be credited to share premium

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Question - At the beginning of 2020, Black Beans Company issued 5,000, 6% convertible bonds. The bonds have a three-year term and are issued at 110 with a face amount of P1,000 per bond. Interest is payable annually every December 31. Each bond is convertible at anytime up to maturity into 100 ordinary shares with par value of P5. When the bonds are issued, the prevailing market rate of interest for similar instrument without the conversion option is 9%. Round off present value factors to two decimal places.

1. What is the equity component arising from the original issuance of the convertible bonds?

2. What amount should be credited to share premium assuming all the bonds were converted into ordinary shares on June 30, 2021?

3. What amount should be credited to share premium assuming only 3,000 bonds were converted into ordinary shares on June 30, 2021?

Reference no: EM133145063

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