Uberita Company issued 5,000 convertible bonds at the beginning of the current year. The bonds had a four year term with a stated rate of interest of 6%, and were issued at par with a face value of P1,000 per bond. Interest is payable annually on December 31. Each bond is convertible into 50 ordinary shares with a par value of P10. The market rate of interest on similar nonconvertible bond is 9%. At the issuance date, the amount of P485,000 was credited to share premium from conversion privilege. The bonds were not converted and instead, the entity paid off the convertible bondholders at maturity. What amount should be reported as gain or loss on the full payment of the convertible bonds at maturity?

Date Transaction Debit Credit Jan-01 Cash 5000000 6% Convertible Bonds Payable 4515000…

Answered: Uberita Company issued 5,000…

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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Uberita Company issued 5,000 convertible bonds at the beginning of the current year. The bonds had a four year term with a stated rate of interest of 6%, and were issued at par with a face value of P1,000 per bond. Interest is payable annually on December 31. Each bond is convertible into 50 ordinary shares with a par value of P10. The market rate of interest on similar nonconvertible bond is 9%. At the issuance date, the amount of P485,000 was credited to share premium from conversion privilege. The bonds were not converted and instead, the entity paid off the convertible bondholders at maturity. What amount should be reported as gain or loss on the full payment of the convertible bonds at maturity?

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