Problem Isabel Company had outstanding share capital with par value of P50,000,000 and 12% convertible bonds payable with face amount of P10,000,000. Interest on the bond is payable annually on December 31. The conversion clause entitled the bondholders to receive 50 shares of P20 par value in exchange for each P1,000 bond. At year-end, the holders of bonds with face amount of P2,000,000 exercised the conversion privilege. The market price of the bonds on that date was P1,200 per bond and the market price of the share was P25. The premium on bonds payable at the date of conversion was P3,000,000. The share premium from conversion privilege had a balance P1,500,000 at the date of conversion. What amount of share premium should be recognized by reason of the bond conversion? a. 450,000 b. 300,000 c. 600,000 d. 900,000

Problem Isabel Company had outstanding share capital with par value of P50,000,000 and 12% convertible bonds payable with face amount of P10,000,000. Interest on the bond is payable annually on December 31. The conversion clause entitled the bondholders to receive 50 shares of P20 par value in exchange for each P1,000 bond. At year-end, the holders of bonds with face amount of P2,000,000 exercised the conversion privilege. The market price of the bonds on that date was P1,200 per bond and the market price of the share was P25. The premium on bonds payable at the date of conversion was P3,000,000. The share premium from conversion privilege had a balance P1,500,000 at the date of conversion. What amount of share premium should be recognized by reason of the bond conversion? a. 450,000 b. 300,000 c. 600,000 d. 900,000

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter7: Financial Activities

Section: Chapter Questions

Problem 10QE

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