On January 1, 2020, Mighty Company decided to issue 3,000, 10-year bonds of 8% Php 1,000.00 face
Question:
On January 1, 2020, Mighty Company decided to issue 3,000, 10-year bonds of 8% Php 1,000.00 face amount each with warrants to acquire share capital at Php 25.00. The warrants entitle the holders to purchase 5 shares of Php 20.00 par value share capital. An estimate shows that without warrants, the bonds would sell at 114.7 with a 6% effective yield. The bond price with warrants is Php 120.00. All warrants are exercised at December 31, 2020.
a. Determine the amount that will be accounted to equity.
b. How much is the total premium on the issuance of the bonds with warrants?
c. How much is the interest expense to be reported in the statement of comprehensive income?
d. How much is the carrying amount of the bonds payable before bond conversion on December 31, 2020?
e. Compute for the share premium ordinary to be accounted for on the bond conversion on December 31, 2020?
Expert Answer:
a The amount that will be accounted to equity is Php 15000 b The total premium on the issuance ... View the full answer
