What is the carrying value of the debt instruments

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Reference no: EM132760561

Question - On January 1, 2014, Hanamichi Sakuragi Company issued its 9%, 4-year convertible debt instrument with a face amount of P4,000,000 for P4,100,000. Interest is payable every December 31 of each year. The debt instrument is convertible into 80,000 ordinary shares with a par value of P50. When the debt instruments were issued, the prevailing market rate of interest for similar debt without conversion option is 10%. On December 31, 2015, ¼ of the convertible debt instruments were retired for P1,000,000. Without the conversion option, the debt instruments can be retired at 97%.

1. On the date of issue, what amount of the proceeds represents the equity component?

2. On the date of retirement, what amount of the proceeds represents the equity component?

3. What is the carrying value of the debt instruments as of December 31, 2015?

Reference no: EM132760561

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