Reference no: EM132536048
Question 1 - An entity issued 5,000 of 8% 10-year P1,000 face amount bonds with detachable warrants at 110. Each bond carried a detachable warrant for 10 ordinary shares of P100 par value at a specified option price of P120. Immediately after issuance, the market value of the bonds without warrants was P4,800,000 and the market value of the warrants was P1,200,000.
Q1. What is the initial carrying amount of the bonds payable?
A. 5,500,000
B. 4,800,000
C. 4,400,000
D. 5,000,000
Q2. What is the increase in equality as a result of the bond issuance?
A. 1,200,000
B. 1,100,000
C. 500,000
D. 700,000
Q3. What is the share premium from the subsequent exercise of all share warrants?
A. 1,700,000
B. 1,000,000
C. 2,100,000
D. 0
Question 2 - An entity issued 5,000 convertible bonds with P1,000 face amount per bond. The bonds mature I three years and are issued at 110. Interest is payable annually every December 21 at a nominal 6% interest rate. Each bond is convertible at any time up to maturity into 100 shares with per value of par value of P5. It is reliably determined that the bonds would sell only at P4,600,000 without the conversion privilege. What is the equity component of the original issuance of the convertible bonds?
A. 500,000
B. 400,000
C. 900,000
D. 0
Question 3 - After recording interest and amortization, an entity converted P5,000,000 of 12% convertible bonds into 50,000 shares of P50 par value. On the conversion date, the carrying amount of the bonds payable was P6,000,000, the market value of the bonds was P6,500,000, and the share was publicity trading at P150. The entity incurred P100,000 in connection with the conversion. When the bonds were originally issued, the equity component was recorded at P1,500,000. What amount of share premium should be recorded as a result of the conversion?
A. 5,000,000
B. 3,500,000
C. 4,900,000
D. 3,400,000
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