Reference no: EM132554118

Question 1 - On March 1, 2020, De Blas Co, issued P1,000,000 of its 10% non-convertible bonds at 104, due February 28, 2025. Each P1,000 bond was issued with a non-detachable share warrant, each of which entitles the holder to purchase 3 ordinary shares with P25 par value for P40 each over the term of the bond. If sold without the warrants, the bonds would yield 12%. The interest on the bonds is payable annually every February 28 starting February 28, 2021.

On December 31, 2020, 200 share warrants were exercised and on June 30, 2021, 350 share warrants were exercised. Remaining share warrants were retired on maturity date.

Round off present value factors to four decimal places.

1. What amount was assigned to the share warrants on March 1, 2020?

2. What amount shall be credited to share premium upon exercise of the share warrants on December 31, 2020?

3. What amount shall be credited to share premium upon exercise of the share warrants on June 30, 2021?

4. What amount shall be credited to share premium upon retirement of the bonds on February 28, 2025?

Question 2 - On January 2, 2020, the Ming Corp. issued P5,000,000 convertible bonds bearing an annual interest rate of 8%. Interest is payable annually every December 31 and the bonds mature on December 31, 2024. The bonds were sold at 104. Each P5,000 bond is convertible into 40 ordinary shares of P100 par. Without the conversion privilege, the bonds would have sold to yield 10%.

On December 31, 2022, after paying the periodic interest, P1,000,000 of the bonds were converted into ordinary shares. On December 31, 2023, after paying the periodic interest, P2,000,000 of the bonds were retired at 101.

Round off present value factors to four decimal places.

5. What amount was assigned to the bond conversion privilege on January 2, 2020?

6. What amount shall be credited to share premium on December 31, 2022?

7. How much shall be recognized as gain or loss on early retirement of bonds on December 31, 2023? (Indicate whether GAIN or LOSS)

8. What amount shall be presented as bonds payable on December 31, 2023?