On January 1, 2019, SM Company issued P6,000,000 of 12% bonds payable maturing in five years. The bonds pay interest semiannually on July 1 and January 1. Each P1,000 bond includes non-detachable share warrant that gives the bondholder the right to purchase 20 ordinary shares of P100 par value ordinary shares of SM at a price of P150 per share within the next three years. The bonds and warrants were issued at 110. The value of the warrants at the time of issuance was P800,000. However, it was ascertained that SM Company’s bonds would have sold for only P5,600,000 without the share warrants. On December 31, 2019, the bondholders exercised all the share warrants and SM issued the corresponding shares. What is the credit to share premium in 2019 from the issuance of the shares through the exercise of the share warrants? 7,000,000 6,800,0006,000,000 6,825,000

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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On January 1, 2019, SM Company issued P6,000,000 of 12% bonds payable maturing in five years. The bonds pay interest semiannually on July 1 and January 1. Each P1,000 bond includes non-detachable share warrant that gives the bondholder the right to purchase 20 ordinary shares of P100 par value ordinary shares of SM at a price of P150 per share within the next three years. The bonds and warrants were issued at 110. The value of the warrants at the time of issuance was P800,000. However, it was ascertained that SM Company’s bonds would have sold for only P5,600,000 without the share warrants. On December 31, 2019, the bondholders exercised all the share warrants and SM issued the corresponding shares. What is the credit to share premium in 2019 from the issuance of the shares through the exercise of the share warrants?

7,000,000 6,800,000
6,000,000 6,825,000

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