On 1 April 2020, an 8% convertible loan with a nominal value of P600,000 was issued at par. It is redeemable on 31 March 2024 also at par. Alternatively it may be converted into equity shares on the basis of 100 new shares for each P200 worth of loan note. An equivalent loan note without the conversion option would have carried interest at 10%. Interest of P48,000 has already been paid and included as a finance cost. Prepare all the necessary entries related to the loan.

On 1 April 2020, an 8% convertible loan with a nominal value of P600,000 was issued at par. It is redeemable on 31 March 2024 also at par. Alternatively it may be converted into equity shares on the basis of 100 new shares for each P200 worth of loan note. An equivalent loan note without the conversion option would have carried interest at 10%. Interest of P48,000 has already been paid and included as a finance cost. Prepare all the necessary entries related to the loan.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Debenture Valuation

A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.

Note Valuation

It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:

Question

On 1 April 2020, an 8% convertible loan with a nominal value of P600,000 was issued at par. It is redeemable on 31
March 2024 also at par. Alternatively it may be converted into equity shares on the basis of 100 new shares for each
P200 worth of loan note.
An equivalent loan note without the conversion option would have carried interest at 10%. Interest of P48,000 has
already been paid and included as a finance cost.
Prepare all the necessary entries related to the loan.

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