On January 1, 20x1, SENECTITUDE OLD AGE Co. issued its 12%, 3-year, P2,000,000 convertible bonds at110. Each P1,000 bond is convertible into 8 shares with par value per share of P100. Principal is due onDecember 31, 20x3 but interests are due annually at each year-end. When the bonds were issued, they wereselling at a yield to maturity market rate of 10% without the conversion option.On December 31, 20x2, half of the bonds were converted into equity. Conversion costs incurred amounted toP20,000.Requirements:a. Provide the pertinent entries.b. Net increase in equity as a result of the conversion.c. Net increase in "share premium" general account as a result of the conversion. Supersonic Company was authorized to issue P7, 000,000 face values, 12%, 10-years bonds on April 1, 2019.Interest on the bonds is payable semiannually on April I and October I of each year.The bonds were sold to underwriters on April 1, 2019 at 106. The entity amortizes discount or premium onlyat the end of the fiscal year, using the straight line method.Required:1. Prepare the jourmal entries for 2019 and 2020 including adjustment at the end of each year. Usememorandum approach.2. Present the bonds payable in the statement of financial position on December 31, 2020.

Issue date= Jan 1, 20X112% convertible bonds at 110Conversion ratio= 1 bond= 8 shares

Answered: On January 1, 20x1, SENECTITUDE OLD AGE…

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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