CPA REVIEW SCROOL OF THE PHILIPPINES Manila FINANCIAL ACCOGNTING AND REPORTING _ VALIXISIVIVALIVESCALASANTOSDELA CRUZ | owns PAYARLE i 1. Ox March 1, 20}9, an entity issued 5,000 of P1,000 face value bonds at 110 plus accrued interest. ‘The entity paid bond issue cost of P400,000. The bonds were dated November 1, 2018, mature on ‘November 1, 2028, and bear interest at 12% payable semiannually on May | and Nc 1. What ne| acu was csv rom the Bond insane? osname | | | s0c00 é.| 5300000 4. 5,100,000 li 2, ‘During the cuent year an entity issued 5,000,000 9% face value bonds at 110 at interest at, in connection with the iss ofthe bonds, the entity pa the following cos: 1 Promotion cost 100,000 Engraving and printing cost 200,000 Underwriter commission 400,000 Legal fees + 350,000 Fees paid to accountants for registration 30,000 ‘What amount should be recorded initially as discount or premium on bonds payable? 4. 500000 prenium | . 500,000 discount | © 600,000 premium | 4. 600,000 discount { 5. Ox January 1, 2019, an ety issued 9% bonds inthe fice amount of PS,000,000 which mare on January 1, 2029, The bonds wer issved for Pé,695,000 to yield 10%, lnerest is payable annually ‘on December 31, The entity used the interest method of amortzing bond discount 1, Whats the interest expense for 20197 a 469,500 $00,000 480,000 4. 422,500 2. What isthe carying amount of the bonds payable on December 31, 20197 a 4,695,000 b. 4703750 «. 4714300 i 4. 5,000,000 { 1 4. On January 1, 2019, an entity issued 10-year bonds with face amount of PS,000,000 for P5,775,000) The emtty psid bond issue cost of P106,000 on same date. The stated interest rate on the bonds is 10% payable annually every December 31. The bonds have an an 8% yield per annum af considering the bond issue cost. The entity used the effective interest method of amortizing premium, i | 1. Whatis the interest expense for 20202 t a 454,000 ». 458,960 500,000 450,320 2. What isthe carrying amount of the bonds peyable on December 31, 2020? a 595,960 b. $579,320 © 5,629,000 4. 5,737,000 i 6680Page 2 5, An entity issued 5,000 of $% 10-year P1000 fice amount bond with detachable warrants a 110, Each bond cartied a detachable warrant for 10 ordinary shares of P10O par value a a specified ‘option price of PI20, Immediately afer issuance, the market value ofthe bonds without warrants ‘was P4,$00,000 and the market value of the warrants was PI,200,000, carrying amount of bonds payable? 2. What is the increase in equity asa result of the bond issuance? 1,200,000 1,100,000 "$00,000 4,700,000 3, What isthe share premium from the subsequent exercise ofall share warrants? 1,700,000 b. 1,000,000 2,100,000 d ° 6. An entity issued P5,000,000 face amount 5-year bonds at 120. Each P1,000 bond was issued with 20 ‘nondetachable share warrants. Each warrant entitled the bondholder to purchase one share of P20 par valve for P2S. Immedistely after issuance, the market valve of each warrant was PS. The interest fate is 11% payable annually every December 31. The prevailing market rate of interest fr similar bonds without warrants is 12%. The PV of 1 at 12% forS periods is 057 and the PV of an ordinary annuity of | at 12% for 5 periods is 3.60. What amount should be recorded as increase inequity a3 result of the bond issuance? 2 1,170,000 '. 1,000,000 ©. 7,000,000 a 0 7. An entity issued 5,000 convertible bonds with PI,000 face amount per bond. The bonds mature in three years and are issued a1 110, interest is payable annually every December 31 at 2 nominal 6% interest rate. Each bond is convertible et nytine up to tatty into 100 shares with par value of PS. Its reliably deternined tht the bonds would sell only at 24,600,000 without the conversion privilege. Whats the equity corcponent ofthe origin! issuance of the convertible bonds? 500.000 . 400,000 «. 900,000 a 0 8. After recording interest and xmortization, an entity converted PS 000,000 of 12% convertible bonds into $0,000 shares of PSC par value. On the eunversioa date, the carrying amount of the boads payable was P6,060,000, the market value of the bonds a8 PG $00,000, and the share was publicly trading at PISO. The entity incured 109,000 in connection with tse conversion. When the bonds ere originally issued, the equity conncnets was recorded at P1,00,000. What amount of share ‘premium should be recorded as a result ofthe conversion? $000,000 b. 3,500,000 4,900,000 4. 3,400,000 END 6680