Reference no: EM132960322
On January 1, 2020, Whiskey Corp. issued 1,000 of its January 1, 2015, 12%, 10 year, P1,000 face value bonds with detachable stock warrants at P1,220,000. Each bond, which pays interests every January 1 carried 5 detachable warrants which entitle the holder to acquire one share of Whiskey Corp.'s P50 par value ordinary shares for every warrant at a specified option price of P55 per share. Immediately after the issuance the prevailing market rate of interest is at 10% and the market value of the warrants was P30.
- The present value of P1 at 10% for 5 periods without annuity is at 0.62092
- The present value of P1 at 10% for 10 periods without annuity is at 0.38554
- The present value of P1 at 10% for 5 periods with ordinary annuity is at 3.79079
- The present value of P1 at 10% for 10 periods with ordinary annuity is at 6.14457
1/1/20 1,075,816
1/1/21 120,000 107,582 12,418 1,063,397
1/1/22 120,000 106,340 13,660 1,049,737
Problem 1. What is the equity component of the compound instrument?
Problem 2. What is the balance of the bonds payable as of December 31, 2021?
Problem 3. How much is the interest expense in 2021?
Problem 4. What is the credit to share premium assuming that 80% of the warrants issued with bonds were exercised in 2022
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