On January 1, 2019, Obsidian Co. decided to raise additional capital by issuing P3,000,000 face value 5-year bonds with interest rate of 13% payable annually on December 31. To help the sale of the bonds, 25 share warrants are issued for each P1,000 bond sold, each of which entitled the bondholder to purchase one share of P5 par common stock for P25 within the next three years. Immediately after issuance, the market value of each warrant was P4. The bonds are sold at 110 with warrants but would have sold only at P3,213,000 without the warrants with 11% effective yield. 80% of the total warrants were exercised on December 31, 2020. The remaining warrants were not exercised and expired on December 31, 2021. The market value of the common stock on December 31, 2020, and December 31, 2021, respectively is, P30 and P33.

Note: Round-off amounts to the nearest peso.

Based on the information above, answer the following:

1. How much is the premium or discount on bonds payable on the date of issuance?
2. How much is the share warrants outstanding recognized upon issuance of the bonds on January 1, 2019?
3. How much is the share premium from the issuance of common stock on December 31, 2020?
4. How much is the increase in shareholders' equity upon the expiry of warrants on December 31, 2021?

Answer rating: 100% (QA)

1 388 million dollars was the issue price 0974M The cost of the issue 96K Carrying Capacity 3784M on ... View the full answer