Question
On January 1, 2020, Mahalmo Co. issued its 10%, 4-year, P4,000,000 convertible bonds for the face amount of P4,000,000. The bonds are convertible into P200
On January 1, 2020, Mahalmo Co. issued its 10%, 4-year, P4,000,000 convertible bonds for the face amount of P4,000,000. The bonds are convertible into P200 par ordinary shares at a conversion price of P250 per share. The prevailing rate of interest of the bonds without the conversion option is 15%. Interest is payable every December 31. On December 31, 2020, after payment of interest, 1/2 of the bonds were retired at P 1,900,000 when the fair value of the securities is P350. The prevailing rate of interest of the bonds is 12%. (Use 4 decimal places for PV factors)
(1) The amount allocated to equity component on January 1, 2020:
(2) The gain or loss on the retirement of the bonds on December 31, 2020:
(3) The net increase (or decrease) in equity as a result of the retirement of the bonds on December 31, 2020:
(4) The interest expense in 2020:
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