Each P1,000 bond was issued with 20 detachable share warrants, each of which entitled the bondholder to purchase one share of P5 par ordinary share at P25. At time of issuance, there was no available market value for the warrant. The stated interest rate on the bonds is 11% payable annually every September 30. However, the prevailing market rate of interest for similar bonds without warrants is 12%. The present value of 1 at 12% for 5 periods is 0.57 and the present value of an ordinary annuity of 1 at 12% for 5 periods is 3.60. ChowFan Company's accounting year ends on December 31. On September 30, 2020, what amount should ChowFan record as discount or premium on bonds payable? * O P170,000 discount O P170,000 premium O P400,000 discount O P400,000 premium
Each P1,000 bond was issued with 20 detachable share warrants, each of which entitled the bondholder to purchase one share of P5 par ordinary share at P25. At time of issuance, there was no available market value for the warrant. The stated interest rate on the bonds is 11% payable annually every September 30. However, the prevailing market rate of interest for similar bonds without warrants is 12%. The present value of 1 at 12% for 5 periods is 0.57 and the present value of an ordinary annuity of 1 at 12% for 5 periods is 3.60. ChowFan Company's accounting year ends on December 31. On September 30, 2020, what amount should ChowFan record as discount or premium on bonds payable? * O P170,000 discount O P170,000 premium O P400,000 discount O P400,000 premium
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On September 30, 2020, ChowFan Company issued P5,000,000 face value, 5-year bonds at 102.
Each P1,000 bond was issued with 20 detachable share warrants, each of which entitled the
bondholder to purchase one share of P5 par ordinary share at P25. At time of issuance, there was
no available market value for the warrant. The stated interest rate on the bonds is 11% payable
annually every September 30. However, the prevailing market rate of interest for similar bonds
without warrants is 12%. The present value of 1 at 12% for 5 periods is 0.57 and the present value
of an ordinary annuity of 1 at 12% for 5 periods is 3.60. ChowFan Company's accounting year
ends on December 31. On September 30, 2020, what amount should ChowFan record as discount
or premium on bonds payable? *
P170,000 discount
P170,000 premium
P400,000 discount
P400,000 premium
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