Problem No. 6 - Convertible Bonds On January 1, 2014, Lin Company issued a convertible bond with a par value of P100,000 in the market for P120,000. The bonds are convertible into 12,000 ordinary shares of P1 per share par value. The bond has a 5-year life and has a stated interest rate of 10% payable annually. The market interest rate for a similar non- convertible bond at January 1, 2011, is 8%. The liability component of the bond is computed to be P107,986. The following bond amortization schedule is provided for this bond. EFFECTIVE-INTEREST METHOD 10% BOND DISCOUNTED AT 8% Cash Paid Interest Expense Premium Amortized Date 1/1/14 12/31/14 12/31/15 12/31/16 12/31/17 12/31/18 P10,000 10,000 10,000 10,000 10,000 P8,638 P8,530 8,412 8,286 8,148 P1.362 1.470 1.588 1.714 1.852 Carrying Amount of Bonds P107,986 106,624 105,154 103,566 101,852 100,000 10. Compute the equity component as of the date of issuance. 11. Assume that the bonds were converted on December 31, 2016. The fair value of the liability component of the bond is determined to be P108,000 on December 31, 2016. Assume that the accrual of interest related to 2016 has been recorded. Calculate the share premium credited to record the conversion on December 31, 2016 12. Assume that the convertible bonds were repurchased on December 31, 2016, for P111,000 instead of being converted. As indicated, the liability component of the bond is determined to be P108,000 on December 31, 2016. Assume that the accrual of interest related to 2013 has been recorded. Calculate the gain or loss on repurchase. 13. Assume that the convertible bonds were repurchased on December 31, 2016, for P111,000 instead of being converted. As indicated the liability component of the bond is determined to be P108,000 on December 31, 2016. Assume that the accrual of interest related to 2013 has been recorded. What is the share premium adjustment due to repurchase