532 ment cising s corre hen the oes not ng the City A's ial Instruments: Presentation PROBLEM 2: FOR CLASSROOM DISCUSSION ancial ght to Financial instruments quity 5 its ** mcial Cse 339 A contract that will be settled by the entity (receiving or) delivering a fixed number of its own equity instruments in exchange for a fixed amount of cash or another financial asset is most likely to be classified by the issuer as ts a financial liability b. an equity instrument A. c. a or b d. neither a nor b 2 Which of the following is classified as an equity instrument Presentation [5] rather than a financial liability? a. Preference shares that are mandatorily redeemable 5 A contract that is settled by the delivery of a variable number of the entity's own equity instruments in exchange for a fixed amount of cash or another financial asset. c. A contract that is settled by the delivery of a fixed number of the entity's own equity instruments in exchange for a variable amount of cash or another financial asset. d. Shares issued but were subsequently reacquired. Compound instruments 3. Entity A issues convertible bonds with face amount of $2,000,000 for P2,600,000. Each P1,000 bond is convertible into 10 shares with par value of $60 per share. On issuance date, the bonds are selling at 102 without the conversion option. What is the value allocated to the equity component on initial recognition? a. 2,040,000 b. 560,000 c. 540,000 d. 460,000