On January 1, 2017, Fruit of the Spirit Company issued a 9% convertible bonds with a face amount of P5,000,000 maturing on December 31, 2026. Each 1,000 bond is convertible into ordinary shares of the company at a conversion price of P31.25 per share. Interest is payable semiannually. At the date of issue, the company could have issued nonconvertible debt with a ten-year term bearing a coupon interest rate of 12%. On January 1, 2022, the convertible bond has a fair value of P5,500,000. The company made a tender offer to the holders to repurchase the bonds f
On January 1, 2017, Fruit of the Spirit Company issued a 9% convertible bonds with a face amount of P5,000,000 maturing on December 31, 2026. Each 1,000 bond is convertible into ordinary shares of the company at a conversion price of P31.25 per share. Interest is payable semiannually. At the date of issue, the company could have issued nonconvertible debt with a ten-year term bearing a coupon interest rate of 12%.
On January 1, 2022, the convertible bond has a fair value of P5,500,000. The company made a tender offer to the holders to repurchase the bonds for P5,500,000. The holders of the P2,500,000 bonds accepted the offer. At the date of repurchase, the company could have issued nonconvertible bonds with a five year term bearing a coupon interest rate of 8%.
On December 31, 2022, to induce the holders of the remaining bonds to convert the bonds promptly, the company reduces the conversion price to P25 if the bonds are converted before March 1, 2023. The market price of the company’s shares on the date the terms are amended is P34.50 per share.
Based on the given information and the result of your audit, determine the following (Round off present value factors to four decimal places):
- The proceeds from issuance of convertible bonds to be allocated to the equity component is?
- The carrying amount of the bonds on December 31, 2021 is?
- The amount to be recognized in profit or loss as a result of the repurchase of the bonds on January 1, 2022 is?
- The repurchase of the bonds on January 1, 2022 decreased equity by:
- The amount to be recognized in profit or loss as a result of the amendment of the terms on December 31, 2022 is?
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