Problem 10: On January 1, 20x1, SENECTITUDE OLD AGE Co. issued its 12%, 3-year, ₱2,000,000 convertible bonds at 110. Each ₱1,000 bond is convertible into 8 shares with par value per share of ₱100. 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 ₱20,000. 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.
Problem 10: On January 1, 20x1, SENECTITUDE OLD AGE Co. issued its 12%, 3-year, ₱2,000,000 convertible bonds at 110. Each ₱1,000 bond is convertible into 8 shares with par value per share of ₱100. 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 ₱20,000. 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Problem 10:
On January 1, 20x1, SENECTITUDE OLD AGE Co. issued its 12%, 3-year, ₱2,000,000 convertible bonds at
110. Each ₱1,000 bond is convertible into 8 shares with par value per share of ₱100. 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
₱20,000.
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.
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