ANSWER 2 QUESTIONS about FINANCIAL LIABILITIES Bonds with Equity Characteristics, Convertible Bonds & Debt Restructuring

1.) On January 2,2018, the Zen Corporation issued 5,000,000 convertible bonds bearing an annual interest rate of 8%. Interest is payable annually every December 31 and the bonds mature on December 31, 2022. The bonds were sold 104. Each 5,000 bond is convertible into 40 ordinary shares of 100 par. Without the conversion privilege, the bonds would have sold to yield 10%.

On December 31,2020, after paying the periodic interest, 1,000,000 of the bonds were converted into ordinary shares.

On December 31,2021, after paying the periodic interest, 2,000,000 of the bonds were retired at 101. Market rate of interest for similar bonds without the conversion feature is 11%.

REQUIRED:

(a) Give the entry to record the issuance of the bonds.

(b)Prepare the entry to record the periodic interest and discount amortization on December 31, 2019.

(c)Prepare the entries to record the periodic interest and the conversion of bonds on December 31, 2020.

(d)Prepare entries to record the periodic interest and the retirement of bonds on December 31, 2021.

(e)Prepare the entries for the periodic interest and the redemption of the bonds on December 31, 2022.

2.) Sisy Company has an outstanding 950,000 note payable to Bro Finance Corporation. Because of financial difficulties, Sisy negotiates with Bro to exchange inventory of machine parts to satisfy the debt. The cost of the machine parts inventory transferred is carried at sisy's books at P 610,000. The estimated sales price of these inventory items is p 835,000.

REQUIRED:

1.) How much shall be recognize as gain on debt restructuring?

3.) LOL Company is unable to meet interest payments and fund requirements to retire its 1,500,000 bonds payable. Accrued interest on the bonds amounted to 150,000. The bonds are held by Easy Investments , Inc. In order to prevent bankruptcy, LOL entered into an agreement with Easy to exchange equity securities for the debt. LOL is issuing 20,000 shares of its 50 par value ordinary shares. The ordinary share is currently selling at 65.

REQUIRED:

1.) How much shall be recognize as gain on debt restructuring?