ReSA ‘The Keview Scl.vol of Accountancy ‘Tel. No. 735-9807/734-3989 € Uberita/C. Espenitla Hinancial Accounting and Reportin G. Macariola/S. Binaluyo = Long-term 1. On December 31. 2018, Extract Company issued a 140,000,000 5-year of PI par value each at an issue price of 0.90 per unit, ‘The bond carries a coupor interest rate of 6% and interest is payable on December 31 each year. Costs of issuing the bond, whick included underwriting fees, totaled P2,000,000, ‘The prevailing market Fate of interest for similar risk class bonds on December 31, 2018 was 10%. wg Extract Company Question 1: What is the initial carrying value oF the bond on December 31, 2018 assu has the policy to measure the bond ai fiir vive 16 profit oe loss? 000,000 «. P38,000,000 : b, P36,000,000 4, P30,000,000 ‘Question 2: What is the initial caitying value 9i eve bond on December 31, 2018 assun hhas the policy to measure the bord at amortized cost model? a, P34,000,000 . P38,000,000 b. 36,000,000 4. P40,000,000 016. The bonds What are the 2. Downing Company pay interest semi proceeds from the bond issue’? el le oe ai 3.0% 5.0% | 6. Present value of single sun for § period [SIS | gene) Fass [nu Preset value ofa single sum for 10 periets 78120 | ‘74409 | ‘61301 | ‘35839 Present value ofan annuity te act aasts | asro7 | aszo48| 421236 (Present 8.75206 | _8.53020 | _7.72173 |_7.36009 a. P5,000,000 ©. PS.217.308 b. ps.216.404 a ps.218,809 On July 1, 2016, Glamorous Corporation issued 11 bonds in the face amount of P2,000,000 that mature on June 30, 2020. “The bonds were issusd w yield 5%, and interest is payable every January I and July 1 Glamorous Corporation uses the effective ierest method of amertizing bond premium of discount, The following are the present value factors PV of 5% for an ordinary annuity of PI after 8 pesiods 6463 PV of 5% afler $ interest perious 077 What is the carrying value of the debt nstruments as of December 31, 2016? a 2,083,610 €. F2.058.176 1b. P2.051,086 . P2.064.930 4. At the beginning of 2016, Wallace Corporation issued 10% bonds with a face value of P 900,000. These bonds ‘mature in the five years, and interest is paid semiannually on June 30 and December 31. The bonds were welt for P833,760 to 7, Wallace uses a calendar-year reporting period, Using the effective-interest method of amortization, what amount of interest expense should be reported for 2016? (Round your answer to the ‘nearest peso) a P 99.750 &. P100353 b. P100,050 d. PI93,288. issues 100 million unsecured bonds at an issue price 95 cents per unit ‘Transaction costs, that include underwsiting to PS00,000, The bond pa the first year and thereafter interest paymert ncteases at {8 per year. ‘The bond mature on December 31-2021 are redeemable at the nominal value of M1 cach, Ate date oF issue. Monterey Company has a eredit rating of ABB" and its market interest rate is 7.09%, Bur due to the imputation of the transaction cost, the effective rate of the debt is 7.21%.« What isthe 1 cest arse debt as of December 31, 2019? “a P97313402 = PH0491439 #. 99.320.703 ah Piou736871 3715 Page I af 2 4. On January 1, 2017, Monterey ComparReSA/ Financial Accounting and Reporting: Liabitities-Long-term 6, On January 1, 2016, Trader Company issued iis Aa. d-year convertible debt instrament with a face amount of 6,000,000 for P5,900.000. Interest is payable every December 31 of each year. The debt instrument is convertible into 50.000 ordinary shares with a par valve of #100, When the debt instruments were issued, the prevailing market rate of interest for similar debt withext conversion option is 10%. PV of 10% foran ordinary annuity of PI after 4 peri 3.169865 PV of 10% after 4 interest periods, 683013 Question |: What is the amortized cost ofthe debt as wf December 31, 2018? a. PS619.616 ¢. P§.791,735 b.P5,701.578 4. 5.890.909 Question 2: What isthe amount of interes expense forthe year ended December 31, 2017? 2. PS61,962 ©. PSPS b 570,158 a. Psg9.cor 7. On January 1, 2017, Shredder Comp its 10%, 4-year convertible debt instrument with a face amount ‘of P3,000,000 for P3.500.000. Interest payable every December 31 of each year, The debt instrument is convertible into 30.000 erdinary shares with a par value of P100. The debt instrument is convertible ino equity from the time of issue until maturity. When the debt instruments were issued. the prevailing market rate of interest for similar debt without conversion option is 8%. PV ors! for an ordinary annuity of PI alter 4 periods 3.3121268 PV ors? after 4 interest periods 7350298 On December 31. 2019, Shredder Company vonverted all the debt instruments by issui shares. Question 1: What is the carrying value of the compeund instruments as of December 31, 2019? a, P3,356,829 ©. 73,455,809 b. P3.408.269 a P3.500.000 Question 2; What is the loss? a Paadaga 9252370 b. P248,559 a. PIES 898 ount of interest expense should the company report in the Dec. 31. 2018 profit or 8. On January 1, 2017, Faith Company issued iis 8%, $year convertible debt instrument with a face amount of 8,000,000 for P7.700.000, Interest is payable every December 31 of each year. The debt instrument is convertible into 30.000 ordinary shares with a par value of PIOO. When the debt instruments were issued, the prevailing market rave of interest for similar debt withwut conversion option is 10%, (on December 31, 2019, all the convene debt instrumeits were rtited for P,000,000. The prevailing rate of intrest on a similar debt instrument as of December 31.2019 8% without the conversion option Question: What is the carrying value of the delt instruments as of December 31. 2019? 2 P7393,473 . P7A92,192 b. P7,492,820 d. P7.722.314 : ‘Question2: On the date of retirement, what amount of the payments represents zhe equity component? a PI36878 £. P165.760 b. P140.729 P305.760 Question3: What amount of gain or loss that should be reported in the profit or loss on the retirement of the convertible debt instruments? a 136.957 © P165.797 b. 138.420 4. 305,760 Question 4: What amount of gain or oss that should be reported directly in the shareholders" equity on the retirement of the convertible debt instrument” a. 136.957 &. PI6S,197 b. 138,420 i. 305,760 3715 Page 2 of 2 ‘The Review School of Accountancy ‘wel. No. 735-9607 & 734-3989