Problem 1

1.) PV of the principal (4,000,000 x 0.77218) ₱ 3,088,720.00

PV of the interest payments
(4,000,000 x 6% x 2.53130) 607,512
Liability Component of the convertible debt ₱ 3,696,232.00

2.) Issue price ₱ 4,000,000.00

Less: Liability Component 3,696,232
Equity Component ₱ 303,768.00

3.) Date Int. Paid Int. Exp. Discount Amort. CV

01/01/2022 ₱ 3,696,232
31/12/2022 ₱ 240,000.00 ₱ 332,661 ₱ 92,661 ₱ 3,788,893
31/12/2023 ₱ 240,000.00 ₱ 341,000 ₱ 101,000 ₱ 3,889,893
31/12/2024 ₱ 240,000.00 ₱ 350,090 ₱ 110,090 ₱ 3,999,984

Interest Expense - December 31, 2023 ₱ 341,000

4.) CV - Dec. 31, 2023 ₱ 3,889,893

Add: Equity Component 303,768
Total Consideration ₱ 4,193,661
Par value of ordinary share
(4,000 x 200 x 2) ₱ 1,600,000

Share premium - issuance ₱ 2,593,661

Problem 2

1.) Issue price ₱ 5,000,000

Multiply: Market value of 95 95%
CV on the date of issuance ₱ 4,750,000

2.) Issue price (5,000,000 x 103) ₱ 5,150,000

Market price (5,000,000 x 95) 4,750,000
Equity Component ₱ 400,000

3.) Cash (5,000,000 x 3%) ₱ 150,000

Multiply: 50
Total ₱ 7,500,000
Equity Component 400,000
Total Consideration ₱ 7,900,000
Par value of P25 (150,000 x 25) 3,750,000
 Share Premium ₱ 4,150,000

Problem 3

a. Retained Earnings 875,000

PPE 875,000
To reduce the amount of PPE

b. Retained Earnings 375,000

Other NCA 375,000
To reduce the amount of Other NCA

c. Ordinary Shares 2,000,000

Share Premium 2,000,000
To reduce the amount of Ordinary Shares

d. Share Premium 2,250,000

Retained Earnings 2,250,000
To offset deficit against the share premium

ASSETS LIABILITIES & EQUITY

Current Assets ₱ 1,375,000 Total Liabilities ₱ 1,500,000
PPE (Net) 2,500,000 Ordinary Shares 2,000,000
Other Non-Current Assets 125,000 Share Premium 500,000
Total Assets 1.) ₱ 4,000,000 Total Liabilities & Equity ₱ 4,000,000

2.) Share Premium

₱ 2,250,000 ₱ 2,000,000
750,000
2,250,000 2,750,000
₱ 500,000

3.) Retained Earnings

₱ 875,000
375,000
1,000,000
₱ 2,250,000 ₱ 2,250,000