Reference no: EM132929452
On September 1, 2021 CPA Company issued P6,700,000 face amount, 5- year bonds at 112. Each bond was issued with 22 detachable warrants, 10 warrants entitled the bondholder to purchase 3 ordinary shares of P7 par value at P33. Immediately after issuance, the market value of each warrant was P8. The stated interest rate on the bonds is 12% payable annually every August 31. However, the prevailing market rate of interest for similar bonds without warrants is 14%.
Problem 1. What is the initial measurement of the bonds payable?
Problem 2. What is the total increase in equity after the exercise of all the detachable warrants?
Problem 3. What is the journal entry to record the exercise of 3,000 detachable warrants?
Problem 4. Assuming the exercise of the 1,000 detachable share warrant was on December 31, 2021, what is the interest expense for 2022?
Problem 5. Assuming the exercise of the 1,000 detachable share warrant was on July 31, 2022, what is the carrying amount of the bonds payable on December 31, 2022?
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