What is the gain on the conversion of the bonds

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Reference no: EM132644422

Question - On June 30, 2012, the original issue date, Sellers Inc. purchased P500,000 of 10-year 12% convertible bonds at 104. The bonds are convertible into 50 shares of P10 par value ordinary shares for each P1,000 bond. The interest is payable semi-annually on June 30 and December 31. On March 31, 2013, Sellers Inc. converts P300,000 of the bonds. On March 31, 2013, the market price of the ordinary shares is P30 per share. It is reliably determined that the bonds would sell only at 98 without the conversion privileged.

Required -

a) Prepare entries related to the convertible bonds for the year 2012-2013. (with explanation)

b) What is the gain or (loss) on the conversion of the bonds?

Reference no: EM132644422

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