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What is the market price of the bond ex warrant

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Reference no: EM133100344

Question - At the beginning of the current year, Stealers Company issued P10,000,000 of 12% nonconvertible bonds at 104 which are due on 5 years. In addition, each P1,000 bond was issued 30 share warrants, each of which entitled the bondholder to purchase for P50, one ordinary share of Stealers Company, par value P25. Interest is payable annually every end of the year. On the date of issuance, the market value of the ordinary share was P40 and the market value of the share warrant was P4. The market rate of interest for similar bonds ex-warrants is 14%. The present value of 1 at 14% for 5 periods is 0.52 and the present value of an ordinary annuity of 1 at 14% for 5 periods is 3.43.

Required -

Q1. What is the market price of the bond ex warrant?

Q2. What is the equity component arising from the issuance of the bonds payable?

Q3. What is the entry to record the issuance of bonds?

Q4. What is the entry if 80% of share warrants were exercised?

Reference no: EM133100344

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