On January 1, 2020, Safety Company issued 10,000 P1,000 bonds with 10% stated interest payable every yearend for five years. Each bond carries rights to purchase 50 P10-par ordinary shares of Safety for P14 each. The market rate of interest ex-warrants is 12%. On December 29, 2021, some of the bondholders exercised their share warrants. When preparing the 2021 financial statements, however, the cash records were found to be included among those w
On January 1, 2020, Safety Company issued 10,000 P1,000 bonds with 10% stated interest payable every yearend for five years. Each bond carries rights to purchase 50 P10-par ordinary shares of Safety for P14 each. The market rate of interest ex-warrants is 12%.
On December 29, 2021, some of the bondholders exercised their share warrants. When preparing the 2021 financial statements, however, the cash records were found to be included among those which were burnt from a firework incident during the New Year celebration.
Upon inspection of your accounting clerk, he found the following recordings in the Shareholders' Equity.
• The Share Capital increased by P3,000,000 as a result of the exercise of warrants.
• The Share Premium - Issuance account increased by P1,392,720 as a result of the exercise of warrants.
• The Share Warrants Outstanding account had a remaining balance of P128,480 after the exercise of warrants.
a. How much is the net increase/decrease in the Shareholders' Equity during 2021? [Indicate whether it is an increase or decrease]
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