Auditing problems

PROBLEM NO. 5 On January 2, 2018, the Lakers, Inc. issued P4,000,000 of 8% convertible bonds at par. The bonds will mature on January 1, 2022 and interest is payable annually every January 1. The bond contract entitles the bondholders to receive 6, P 100 par value, ordinary shares in exchange for each P 1,000 bond. On the date of issue, the prevailing market interest rate for similar debt without the conversion option is 10%. On December 31, 2018, the holders of the bonds with total face value of P 2,000,000 exercised their conversion privilege. In addition, the company reacquired at 110, bonds with a face value of P 1,000,000. Based on the above and the result of your audit, answer the following: 21 How much of the proceeds from the issuance of convertible bonds should be allocated to equity? A PI,268,000 B P253,632 C P443,328 D PO 22 How much is the carrying amount of the bonds as of December 31, 2018? A P4,000,000 B P3,592,340 C P2,778,800 D P3,801,000 23 How much is the interest income for the year 2019? A P320,000 B P359,234 C P277,880 D P380,100 24 The conversion of the bonds on December 31, 2019 will increase share premium by A P730,553 B P615,786 C P800,000 D PO 25 How much is the loss on bond reacquisition on December 31, 2019? A P100,000 B P192,106 C P134,724 D PO