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What amount should be recorded initially as discount

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Question - Palayan Company issued P5,000,000 face amount, 5 year bonds at 109. Each P1,000 bond was issued with 10 share warrants, each of which entitled the bondholder to purchase on share of P100 par value at P120. Immediately after issuance, the market value of each warrant was P5. The stated interest rate on the bonds is 11% payable annually every end of the year. 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 3.6. What amount should be recorded initially as discount or premium on bonds payable?

Reference no: EM133176432

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