1. On August 1, 2012, White Co. acquired Black Co. bonds with a face value of P90,000 at 95 plus accrued interest. Interest of 12% per annum is payable semi-annually on April 1 and October 1. The bonds were issued on April 1, 2012. Bonds of P30,000 mature at annual interval beginning April 1, 2013.

Required:

a) Prepare the amortization table following the bond outstanding method.

b) Prepare entries related to the bonds for the year 2012-2014.

2. 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. It is reliably determined that the bonds would sell only at 98 without the conversion privileged. 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.

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