Reference no: EM132881048
Clay Company had P600,000 convertible 8% bonds payable outstanding on June 30, 2016. Each P1,000 bond was convertible into 10 ordinary shares of P50 par value. On July 1, 2016, the interest was paid to bondholders, and the bonds were converted into ordinary shares, which had a fair value of P75 per share. The unamortized premium on these bonds was P12,000 at the date of conversion. No equity component was recognized when the bonds were originally issued.
Problem 1: What is the increase in share capital as a result of the bond conversion?
a. 300,000
b. 306,000
c. 450,000
d. 600,000
Problem 2: What is the increase in share premium as a result of the bond conversion?
a. 312,000
b. 306,000
c. 162,000
d. 12,000
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