Reference no: EM133093538
Question - On January 2, 2019, the Mauban, Inc. issued P3,000,000 of 9% convertible bonds at par. The bonds will mature on January 1, 2023 and interest is payable annually every January 1. The bond contract entities the bondholders to receive 6, P100 par value, ordinary shares in exchange for each P1,000 bond. On the date of issue, the prevailing market interest rate for similar debt without the conversion option is 10%.
On January 1, 2023, the holders of the bonds with total face value of P1,000,000 exercised their conversion privilege. On that date, the bonds were selling at 110 and the ordinary share at P42.
Required -
1. What the proceeds from issuance of convertible bonds to be allocated to the liability component?
2. What the proceeds from issuance of convertible bonds to be allocated to the equity component?
3. What the carrying amount of the bonds payable on December 31, 2019?
4. What the expense for the year 2020?
5. What the gain to be recognized on conversion of the bonds?
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