On January 1, 20x1, SENECTITUDE OLD AGE Co. issued its 12%, 3-year, P2,000,000 convertible bonds at 110. Each P1,000 bond is convertible into 8 shares with par value per share of P100. Principal is due on December 31, 20x3 but interests are due annually at each year-end. When the bonds were issued, they were selling 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 to P20,000. 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.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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On January 1, 20x1, SENECTITUDE OLD AGE Co. issued its 12%, 3-year, P2,000,000 convertible bonds at
110. Each P1,000 bond is convertible into 8 shares with par value per share of P100. Principal is due on
December 31, 20x3 but interests are due annually at each year-end. When the bonds were issued, they were
selling 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 to
P20,000.
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.
Transcribed Image Text:On January 1, 20x1, SENECTITUDE OLD AGE Co. issued its 12%, 3-year, P2,000,000 convertible bonds at 110. Each P1,000 bond is convertible into 8 shares with par value per share of P100. Principal is due on December 31, 20x3 but interests are due annually at each year-end. When the bonds were issued, they were selling 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 to P20,000. 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 only
at 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. Use
memorandum approach.
2. Present the bonds payable in the statement of financial position on December 31, 2020.
Transcribed Image Text: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 only at 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. Use memorandum approach. 2. Present the bonds payable in the statement of financial position on December 31, 2020.
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