On January 1, 20x2, Gelato Company issued convertible bonds with a face amount of P5,000,000 for P6,000,000. The bonds are convertible into 50,000 shares with P100 par value. The bonds have a 5-year life with a 10% stated interest rate payable annually every December 31. The fair value of the convertible bonds without conversion option is computed at P5,399,300 on January 1, 20x2. On December 31, 20x4, the convertible bonds were not converted but fully paid for P5,550,000. On such date, the fair value of the bonds without conversion privilege is P5,400,000 and the carrying amount is P5,178,300. - What amount should be recorded as equity component arising from issuance of bonds payable on January 1, 20x2? - What amount should be reported as loss on the extinguishment of the convertible bonds payable on December 31, 20x4?
On January 1, 20x2, Gelato Company issued convertible bonds with a face amount of P5,000,000 for P6,000,000. The bonds are convertible into 50,000 shares with P100 par value. The bonds have a 5-year life with a 10% stated interest rate payable annually every December 31. The fair value of the convertible bonds without conversion option is computed at P5,399,300 on January 1, 20x2.
On December 31, 20x4, the convertible bonds were not converted but fully paid for P5,550,000. On such date, the fair
- What amount should be recorded as equity component arising from issuance of bonds payable on January 1, 20x2?
- What amount should be reported as loss on the extinguishment of the convertible bonds payable on December 31, 20x4?
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