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Problem 20-16: (Unamortized Discount)
Problem 20-16: (Unamortized Discount)
On January 2, 2014, Anger Company issued its 9% bonds in the face amount of P 4,000,000 which
mature on January 1, 2024. The bonds were issued for P 3,756,000 to yield 10%. Anger uses the
interest method of amortizing bond discount. Interest is payable annually on December 31.
At December 31, 2015, how much should be Anger's unamortized bond discount?
al P192,364
b) P228,400
c) P211,240
d) P244,000
Answer: C
01.01.14 0 0 0 P3,756,000
On January 2, 2014, East Co. issued 9% bonds in the amount of P1,000,000 which mature on
January 2, 2024. The bonds were issued for P939,000 to yield 10%. Interest is payable annually
on December 31. East uses the interest method of amortizing bond discount. In its December
31, 2014 statement of financial position, what amount should East report as bonds payable?
a) P939,000
b) P947,000
c) P942,900
d) P1,000,000
Answer: C
During 2014, Royal Corporation booed at 95, one thousand of its 8% P5,000 bonds due in ten years.
One detachable stock purchase warrants entitling the holder to buy 20 shares of Royal’s
ordinary shares was attached to each bond. Shortly after issuance, the bonds are selling at 10%
ex-warrant, and each warrant was quoted at P60. The present value factors are the following:
What amount of any of the proceeds from the bond issuance should be recorded as part e
a) none
b) 9250000
c) P225,000
d) P367,000
Answer: D
Schedule 1
On January 1, 2014, Grader Company issued its 10%, 4 year convertible debt instrument with a
face amount of P 4,000,000 for P4,400,000. Interest is payable every December 31 of each year.
The debt instrument is convertible into 35,000 ordinary shares with a par value of P100. When
the debt instruments were issued, the prevailing market rate of interest for similar debt without
a) P 73,860
b) P205,984
c) P142,463
d) P264,800
Answer: B
On January 1, 2014, Tudor Company issued its 10%, 5-year convertible debt instrument with a
face amount of P10,000,000 for P10,000,000. Interest is payable every December 31 of each
year. The debt instrument is convertible 90,000 ordinary shares with a par value of P100.
When the debt instruments were issued, they were selling 97% without conversion option
Tudor Company incurred P80,000 transaction costs on the issue of the debt instruments.
Question 1: How much of the net proceeds represent the equity component?
a) P 297,600
b) P 9,920,000
c) P 9,622,400
d) P 10,000,000
Question 2: How much of the net proceeds represent the debt component?
a) P 297,600
b) P 9,622,400
c) P 9,920,000
d) P 10,000,000
On January 1, 2014, Emilia Corporation issued its 5-year, 12% P5,000,000 face value convertible
debt instrument for P 4,800,000. The debt instrument is convertible into 80,000 ordinary shares
with a par value of P50 per share and can be converted anytime from January 2015 to maturity.
At the time of issue, the market rate of interest for a similar instrument is 14%. Interest is
On July 1, 2015, the entire debt instrument was converted into equity instrument by the issuance
of 80,000 ordinary shares of the enterprise. Transaction costs of P50,000 were incurred in
What amount should be credited to the share premium account as a result of the conversion?
a) None
b) P831,349
c) P152,800
d) P881,549
Answer: B
Total P4,881,349
Excess P 881,349
01.01.14 0 0 0 P4,647,200
On January 1, 2014, Wisdom Company issued its 10%, 6-year convertible debt instrument with a face
amount of P 3,000,000 for P 3,500,000. Interest is payable every December 31 of each year.
The debt instrument is convertible into 30,000 ordinary shares with a par value of P100. The debt
instrument is convertible into equity from the time of issue until maturity. Without the
On December 31, 2015, Wisdom Company converted 1,000,000 debt instruments by issuing
10,000 ordinary shares. As of December 31, 2015, the unamortized premium on the debt
instrument is P135,000.
What amount should be credited to the share premium account as a result of the conversion
a) None
b) P151,667
c) P135,000
d) P180,000
Answer: B