On January 1, 2017, Shredder Company issued its 10%, 4-year convertible debt instrument with a face amount of P3,000,000 for P3.500.000, Interest s pavable everv December 31 of each year. The debt instrument is convertible into 30,000 crdinary shares with a par value of P100. The debt instrument is convertible into equity from the time of issue until maturity. When the debt instruments were issued, the prevailing market rate of interest for similar debt without conversion option is 8%. PV of 8% for an ordinary annuity of Pl ater 4 periods PV of 8% after 4 interest periods 3.3121268 .7350298 On December 31. 2019, Shredder Company converted all the debt instruments by issuing 30,000 ordinary shares. Question 1: What is the carrying value of the compound instruments as of December 31, 2019? P3,356,829 P3,408,269 а. c. P3,455.899 d P3.500.000 b. Question 2: What is the amount of interest expense should thc company report in the Dec. 31. 2018 profit or loss? P244,444 c. P252,370 d. P255,898 а. b. P248,559

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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7.
On January 1, 2017, Shredder Company issued its 10%, 4-year convertible debt instrument with a face amount
of P3,000,000 for P3.500.000. Interest is payable every December 31 of each year. The debt instrument is
convertible into 30,000 crdinary shares with a par value of P100. The debt instrument is convertible into equity
from the time of issue until maturity. When the debt instruments were issued, the prevailing market rate of
interest for similar debt without conversion option is 8%.
PV of 8% for an ordinary annuity of Pl after 4 periods
PV of 8% after 4 interest periods
3.3121268
.7350298
On December 31. 2019, Shredder Company converted all the debt instruments by issuing 30,000 ordinary
shares.
Question 1: What is the carrying value of the compound instruments as of December 31, 2019?
P3,356,829
b.
а.
c. P3,455,899
d. P3.500.000
P3,408,269
Question 2: What is the amount of interest expense should thc company report in the Dec. 31, 2018 profit or
loss?
P244,444
b. P248,559
c. P252,370
d. P255,898
а.
Transcribed Image Text:7. On January 1, 2017, Shredder Company issued its 10%, 4-year convertible debt instrument with a face amount of P3,000,000 for P3.500.000. Interest is payable every December 31 of each year. The debt instrument is convertible into 30,000 crdinary shares with a par value of P100. The debt instrument is convertible into equity from the time of issue until maturity. When the debt instruments were issued, the prevailing market rate of interest for similar debt without conversion option is 8%. PV of 8% for an ordinary annuity of Pl after 4 periods PV of 8% after 4 interest periods 3.3121268 .7350298 On December 31. 2019, Shredder Company converted all the debt instruments by issuing 30,000 ordinary shares. Question 1: What is the carrying value of the compound instruments as of December 31, 2019? P3,356,829 b. а. c. P3,455,899 d. P3.500.000 P3,408,269 Question 2: What is the amount of interest expense should thc company report in the Dec. 31, 2018 profit or loss? P244,444 b. P248,559 c. P252,370 d. P255,898 а.
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