Reference no: EM132801432

Questions -

Q1. After recording interest and amortization, an entity converted P5,000,000 of 12% convertible bonds into 50,000 shares of P50 par value. On the conversion date, the carrying amount of the bonds payable was P6,000,000, the market value of the bonds was P6,500,000, and the share was publicly trading at P150. The entity incurred P100,000 in connection with the conversion. When the bonds were originally issued, the equity component was recorded at P1,500,000. What amount of share premium should be recorded as a result of the conversion?

Q2. On January 2, 20x6, Camay Company purchased a P4,000,000 ordinary life insurance policy on its president. Additional data for the year 20x9 are: Cash surrender value, January 1 P200,000; Cash surrender value December 31, P220,000; Annual insurance premium paid On January 1, 20x9, P80,000; Dividend received on August 1, P10,000. Camay Company is the beneficiary under the life insurance policy. What amount of Life Insurance Expense Camay Company should report in its December 31, 20x9 profit or loss?

Q3. An entity issued 5,000 convertible bonds with P1,000 face amount per bond. The bonds mature in three years and are issued at 110. Interest is payable annually every December 31 at a nominal 6% interest rate. Each bond is convertible at anytime up to maturity into 100 shares with par value of P5. It is reliably determined that the bonds would sell only at P4,600,000 without the conversion privilege. What is the equity component of the original issuance of the convertible bonds?

Q4. DDD Company, an oil production company, has a widely published environmental policy in which it undertakes to clean up all contamination that it causes. On October 1, 20x8, a contamination on a land occurs whilst transporting oil to a particular country. Based on past incidences of such contamination, a third-party contractor is willing to undertake the cleaning up on behalf of DDD Company. It estimates that the cleaning up work would take about two years to finish and it provides the following price quotation (based on current prices); Year 1, P20,000,000 and Year 2, P15,000,000. Due to general inflation and other price increases, DDD Company estimates that the contractor prices would increase by 4% by the end of year 1 and another 4.5% at the end of year 2. Payments will be made at end of each year. The current one-year and two-year risk free rates are 5% and 5.5% respectively and a 3% adjustment is required for the risks that the actual outflows be different from the estimate. What is the amount of provision for decontamination should DDD Company recognized on October 31, 20x8?