Problem 5-1

1.)
Present value of principal Php 3,088,720
Present value of interest payments 607,512
Liability component of the convertible debt Php 3,696,232

2.)
Considerations received Php 4,000,000
Present value of the bonds (3,696,232)
Equity component of the convertible debt Php 303,768

3.)

Date Interests Paid Interest Expense Discount Carrying Amount

1/1/2020 Php 3,696,232
12/31/2020 Php 240,000 Php 332,661 Php 92,661 Php 3,788,893
12/31/2021 Php 240,000 Php 341,000 Php 101,000 Php 3,889,893
12/31/2022 Php 240,000 Php 350,107 Php 101,107 Php 4,000,000

4.)

GENERAL JOURNAL
Page Number
Date
01
2021 Descriptions PR Debit Credit

31-Dec Bonds Payable Php 4,000,000

Share Premium -
Conversion 303, 768
Privelege

Ordinary Shares Php 1,600,000

Discount on Bonds
110,107
Payable

Share Premium -
2,593,661
Issuance

Problem 5-2

1.)
Face value of the Bonds Php 5,000,000
Present value of the Bonds
(PV of Principal + PV of Interest) (4,658,000)
Discount upon issuance Php 342,000
2.)
Issue price of bonds with warrant Php 5,150,000
Market value of bonds ex-warrant 4,658,000
Equity component of the bonds issued Php 492,000

3.)
Cash Php 7,500,000
Share warrants outstanding 492,000
Total consideration received 7,992,000
Shares at par (3,750,000)
Share Premium Php 4,242,000