Question
On January 1, 2014, Hanamichi Sakuragi Company issued its 9%, 4-year convertible debt instrument with a face amount of P4,000,000 for P4,100,000. Interest is payable
On January 1, 2014, Hanamichi Sakuragi Company issued its 9%, 4-year convertible debt instrument with a face amount of P4,000,000 for P4,100,000. Interest is payable every December 31 of each year. The debt instrument is convertible into 80,000 ordinary shares with a par value of P50. When the debt instruments were issued, the prevailing market rate of interest for similar debt without conversion option is 10%. On December 31, 2015, of the convertible debt instruments were retired for P1,000,000. Without the conversion option, the debt instruments can be retired at 97%.
- On the date of issue, what amount of the proceeds represents the equity component?
- On the date of retirement, what amount of the proceeds represents the equity component?
- What is the carrying value of the debt instruments as of December 31, 2015?
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