What is the equity component of the issuance of the convertible bonds on January 1, 2019? What amount of share premium should be recognized on conversion of bonds into share capital?
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Delilah Holdings issued a 4-year P2,500,000 face
It is reliably ascertained that the bonds would sell at P2,350,000 without the conversion feature with an effective yield of 14%. Each P1,000 bond is convertible into 10 shares of P100 par value share capital.
On December 31, 2019, the entire bond issue was converted into share capital, and on this date, the share has a market value of P150 and the bonds are quoted at 101.
What is the equity component of the issuance of the convertible bonds on January 1, 2019?
What amount of share premium should be recognized on conversion of bonds into share capital?
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- On January 1,2020, ABC Company issued P 10,000,000 convertible bonds with a stated rate of 12% at 110. The principal of the bonds is payable on December 31, 2024. Interest on the bonds is payable annually starting December 31,2020. Each P 5,000 bond is convertible into 20 ordinary shares of P 50 par. Without the bond conversion privilege, the bonds would have sold to yield 10%.On December 31,2021 after paying periodic interests, half of the bonds issued were converted to ordinary shares. On October 1,2023, half of the remaining bonds were retired at 102 plus accrued interest. Without the bond conversion privilege, the bonds are quoted at 101.How much is the gain or loss on retirement of bonds on October 1,2023?On June 1, 2019, Leni Company acquired a 5-year, 10%, P1,000,000 face value bonds for P920,000. The company paid broker’s fees amounting to P118,896. As a result, yield rate on the bond was 9%. Interests are collectible annually every May 31. The bonds were selling at 120, 105, 98 as of December 31, 2019, December 31, 2020 and December 31, 2021, respectively. The company classified the investment as Fair Value through Profit or Loss. How much is the interest income that should be recognized for the year ended December 31, 2020?On April 1, 2020, Dalton Ltd. issued a convertible $3,000,000, 25-year, 6% bond at 99. The bond is convertible at a rate of 10 common shares for each $1,000. Similar bonds trading on the market without this option carry an interest rate of 7%. Interest on the bond is paid semi-annually on April and October 1st each year, beginning in October 1, 2020. Dalton uses the effective interest method of amortizing discounts or premiums. REQUIRED: Prepare the journal entry to record the bond issuance using the residual value (incremental) method. Show all calculations. Prepare the journal entry for the first interest payment on October 1, 2020. Prepare the entry on Dalton’s books assuming that 60% of the bonds were converted immediately after the October 1, 2021 interest payment. Prepare the adjusting entry for the interest accrual on December 31, 2021. Prepare the journal entry for the interest payment on April 1, 2022 Prepare the entry on Dalton’s books on the maturity date of the bond.
- On January 1,2020, ABC Company issued P 10,000,000 convertible bonds with a stated rate of 12% at 110. The principal of the bonds is payable on December 31, 2024. Interest on the bonds is payable annually starting December 31,2020. Each P 5,000 bond is convertible into 20 ordinary shares of P 50 par. Without the bond conversion privilege, the bonds would have sold to yield 10%.On December 31,2021 after paying periodic interests, half of the bonds issued were converted to ordinary shares. On October 1,2023, half of the remaining bonds were retired at 102 plus accrued interest. Without the bond conversion privilege, the bonds are quoted at 101.How much was credited to the share premium- ordinary account at the time of conversion of bonds on December 31,2021?On January 1, 2020, Kendall Co. purchased to hold to maturity, 1000, $1,000, 9% bonds for a price to yield an effective interest rate of 10% . Interest is paid semiannually on December 31 and June 30 and the bonds mature on December 31, 2023. What price did Kendall Company pay for this bond?On January 2, 2023, the Suns, Inc. issued P2,000,000 of 8% convertible bonds at par.The bonds will mature on January 1, 2027 and interest is payable annually every January 1. The bond contract entitles the bondholders to receive 6 shares of P100 par valuecommon stock in exchange for each P1,000 bond. On the date of issue, the prevailingmarket interest rate for similar debt without the conversion option is 10%. On January 1, 2027, the holders of the bonds with total face value of P1,000,000 exercised their conversion privilege. On that date, the bonds were selling at 110 and the Ordinary share at P42. 1. How much of the proceeds from the issuance of convertible bonds should be allocatedto equity? P126,816 2. How much is the interest expense for the year 2024? P190,050 3. The entry to record the conversion on December 31, 2005 will include a credit to APIC of? P365,276 4. How much is the loss on bond reacquisition on December 31, 2005? P67,362 5. How much is the carrying value of the…
- Smart Inc. issued P7,500,000 face amount of 12% convertible bonds at 110 on January 1, 2020, maturing on January 1, 2024 and paying interest semi-annually on January 1 and July 1. It is estimated that the bonds would sell only at 105 without the conversion feature. Each P1,000 bond is convertible into 10 ordinary shares with P100 par value. What is the increase in shareholders' equity arising from the original issuance of the convertible bonds? a. Zerob. P 150,000c. P 375,000d. P 750,0001. On January 1, 2020, CHAR Company issued P 10,000,000 convertible bonds with a stated rate of 12% at 110. The principal of the bonds is payable on December 31, 2024. Interest on the bonds is payable annually starting December 31, 2020. Each P 5,000 bond is convertible into 20 ordinary shares of P 50 par. Without the bond conversion privilege, the bonds would have sold to yield 10%. On December 31, 2021, after paying periodic interests, half of the bonds issued were converted to ordinary shares. On October 1, 2023, half of the remaining bonds were retired at 102 plus accrued interest. Without the bond conversion privilege, the bonds are quoted at 101. How much was credited to the share premium- ordinary account at the time of conversion of bonds on December 31, 2021? (For present value factors, do not round off) 2. On January 1, 2021, MAMA Company sold the property to the PAPA Company. There was no established exchange price for the property, and PAPA gave MAMA a P2,000,000…Florence Inc. issued 8,000, 5-year convertible bonds of $2,000 each for $4,000,000 at the beginning of 2021. The bonds have a stated rate of interest of 9% and interest is payable annually. Each bond can be convertible into 100 shares with a par value of $10. The market rate of similar nonconvertible debt is 10%. Determine the fair value of the equity component using the “with-and-without” method is a. $3,848,288 b. $2,483,600 c. $1,365,688 d. $151,712
- On January 1, 2019, YOU TOO Corporation purchased P1,000,000 10% bonds classified as FA@AC. The bonds were purchased to yield 12%. Interest is payable annually every December 31. The bonds mature on December 31, 2023. On December 31, 2019 the bonds were selling at 99. On December 31, 2020, YOU TOO sold P500,000 face value bonds at 101. The bonds were selling at 103 on December 31, 2021. If the entity reclassified the bonds as FA@FVTPL after the sale, how much should be recognized in profit or loss on reclassification date? 39,010 O 31,895 29,010On January 1, 2025, Culver Company sold 12% bonds having a maturity value of $350,000.00 for $376,535.48, which provides the bondholders with a 10% yield. The bonds are dated January 1, 2025, and mature January 1, 2030, with interest payable December 31 of each year. Culver Company allocates interest and unamortized discount or premium on the effective-interest basis. Click here to view factor tables. (a) Your answer is partially correct. Prepare the journal entry at the date of the bond issuance. (Round answer to 2 decimal places, e.g. 38,548.25. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. List all debit entries before credit entries.) Date January 1, 2025 Account Titles and Explanation Cash Premium on Bonds Payable Interest Expense Debit 350000 26535.48 Credit 376535.48On January 1, 2020, Swifty Company sold 11% bonds having a maturity value of $700,000 for $726,535, which provides the bondholders with a 10% yield. The bonds are dated January 1, 2020, and mature January 1, 2025, with interest payable December 31 of each year. Swifty Company allocates interest and unamortized discount or premium on the effective-interest basis. v (a) V Your answer is correct. Prepare the journal entry at the date of the bond issuance. (Round answer to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit January 1, 2020 726,535 Cash Bonds Payable 700,000 Premium on Bonds Pay: 26535
